Can overtime income count for an FHA loan?

Yes, overtime income can be used for FHA qualification — but only if it has a 2-year history and is likely to continue. A letter from your employer confirming that overtime is available and not seasonal is helpful. FHA underwriters average the income over 24 months; a spike in overtime pay in the most recent year is not fully counted unless the history supports it.

Can bonus income qualify for an FHA loan after just 1 year?

Typically no. FHA guidelines require a 2-year history of bonus income to use it for qualifying. However, if your bonus is contractually guaranteed (part of your employment agreement), a lender may count it after 1 year with documentation. The income is averaged over the period it has been received.

Can trust income qualify for an FHA loan?

Yes, trust income can be used if it is ongoing, documented through the trust agreement, and the borrower can demonstrate 3 years of continued receipt. The lender will want a copy of the trust document and bank statements showing consistent deposits.

Can rental income offset debt on an FHA application?

If you own a rental property and receive rental income, FHA allows you to use 75% of the gross rent shown on your tax returns as qualifying income, which reduces your effective DTI. If you're converting your current primary residence into a rental to buy a new home with FHA, the rules are stricter — documentation of a lease and equity in the departing residence are required.

What is the FHA loan limit in Kern County for 2026?

The 2026 FHA loan limit for Kern County is $524,225 for a single-family home, $671,200 for a duplex, $811,275 for a triplex, and $1,008,300 for a 4-unit property. These limits cover the vast majority of active listings in the Bakersfield market.

Can I get an FHA loan if I was recently self-employed?

FHA requires 2 years of self-employment history to use self-employment income. If you transitioned from W-2 employment to self-employment in the same field within the last 2 years, a lender may use combined income — but the most recent 2-year tax returns are required. New self-employed borrowers with under 1 year of history typically cannot use that income for FHA qualification.

Can I buy a multi-unit property with an FHA loan as a first-time buyer?

Yes. FHA allows the purchase of 2–4 unit properties with 3.5% down as long as the borrower occupies one unit as their primary residence. This is one of the most underused strategies in the Bakersfield market — a duplex where you live in one unit and rent the other can dramatically reduce your net housing cost.

What Repairs Does FHA Require Before Closing? (And Who Pays for Them)

An FHA appraisal with required repairs doesn't automatically mean the deal is dead. It means you need a clear plan and fast communication between buyer, seller, agent, and loan officer. I've worked through hundreds of repair conditions over the years. Most are resolvable. What kills deals is not having a plan or waiting too long to make decisions.

How FHA Repair Conditions Work

When an FHA appraiser identifies a property condition issue, they note it in the appraisal report as a condition of value, meaning the appraised value is contingent on the repair being completed. The appraisal is marked "subject to" that repair, and the loan cannot close until the appraiser signs off that the work was done. This requires a re-inspection, sometimes called an appraisal update, after the repair is complete. That re-inspection typically costs $150–$300 and is often paid by the buyer.

The Most Common Required Repairs

In Bakersfield, the FHA repair conditions I see most frequently: peeling or flaking paint on pre-1978 homes; broken or cracked windows; missing handrails on stairs; roof issues with evidence of active leaking; missing seismic strapping on the water heater (California requirement); exposed electrical wiring or open junction boxes; and non-functional plumbing or heating. Most of these are relatively inexpensive to address, a few hundred to a couple thousand dollars in most cases.

Who Pays for FHA Required Repairs?

This is negotiable. California's purchase agreement doesn't automatically assign repair costs to the seller. It depends on what was negotiated in the offer and any subsequent amendments. In practice, buyers in competitive markets often absorb smaller repair costs to keep the deal moving. Motivated sellers frequently agree to handle repairs, especially when the cost is modest and losing the buyer means starting over.

The seller completes repairs before closing. Simplest outcome, seller hires a licensed contractor, work gets done, re-inspection confirms completion, loan closes. The buyer gets a move-in-ready home at no additional out-of-pocket cost.

Price reduction to offset repair cost. The seller lowers the price and the buyer handles repairs after closing. However, FHA requires the physical repair to happen before closing, a price reduction doesn't satisfy a safety-based appraisal condition. Price reductions help with the economics but don't solve the timing problem.

Seller credit combined with actual repair. In some cases, the seller completes the repair and also provides a credit toward other closing costs. This can work well when both parties want the deal to close and there are multiple negotiating points on the table.

FHA Repair Escrow (Escrow Holdback)

For minor, non-safety-related repairs, HUD allows a repair escrow, also called an escrow holdback. The lender holds back funds at closing (typically 150% of the estimated repair cost), and the buyer has a set period, usually 90 days, to complete the repairs after moving in. Not all lenders offer this, and not all conditions qualify for it. Call me if you're in this situation, I'll tell you whether your specific condition qualifies and which lenders I work with that allow holdbacks.

FHA 203(k) for Properties Needing Substantial Work

If a property needs extensive repairs, more than what a simple escrow holdback can cover, an FHA 203(k) rehabilitation loan may be the right solution. A 203(k) finances the purchase price plus the cost of approved renovations in a single mortgage. There's a Streamlined 203(k) for up to $35,000 in repairs without major structural work, and a Standard 203(k) for more extensive rehabilitation. These loans take longer to close and require a HUD consultant for the standard version, but they can make a fixer-upper completely financeable.

What Happens If the Seller Won't Make Repairs

You have options. Walk away with your earnest money if the contract has appropriate contingencies. Switch loan types, if the buyer qualifies for conventional, conventional appraisal standards are less stringent than FHA, and some issues that fail FHA may pass conventional. Renegotiate price to account for repair costs the buyer will handle post-closing, understanding that the repair still needs to happen before closing under FHA rules. Or negotiate an agreement where the seller credits for repairs and the buyer pays for a licensed contractor to complete the work on an agreed timeline before closing.

Common Mistake

Waiting until after the appraisal to address obvious issues that could have been negotiated into the original contract. If you can see the peeling paint, the missing handrail, and the aging roof from the driveway during the showing, so can the FHA appraiser. Address it in the offer, negotiate a repair allowance, structure the price accordingly, or ask the seller to fix identified issues as a contract condition. Discovering it post-appraisal creates pressure for everyone and usually results in renegotiation from a weaker position.

Bottom Line

FHA repair conditions are common, manageable, and rarely fatal if everyone responds quickly with a clear plan. Know the options before the appraisal comes back, because once it does, you'll have limited time to make decisions. Call me when you see the report. We'll figure out the path forward together.