FHA has recently amended their guidelines to allow more flexibility to calculate income for borrowers whose variable income was affected by the COVID 19 pandemic as announced in mortgagee letter ML 2022-09.  

FHA guidelines tend to focus on two years averaging of income, many borrowers were affected in the last two years due to COVID.  This creates a challenge to get approved especially when the borrower’s income has likely improved as compared to during the height of the pandemic.

In the video below we will go over how FHA mortgage letter 2022-09 gives the affected borrowers options to calculate income between these two methods

Standard Income Calculations
FHA has not changed the rules or methods of calculation under the current guidelines.  If the borrower can qualify with averaging in the “low” periods of income in 2020/2021, then nothing in the mortgage letter 2022-09 changes that process.


NEW COVID 19 Exception Calculations
Mortgagee Letter ML 2022-09 outlines a new method for calculating income that eliminates the time periods that the borrower was affected by lower than normal income due to COVID-19.  The letter states the mortgagee must calculate (and submit this work to FHA) that they evaluated both pre-COVID income and post-COVID income and choose the lowest of the two incomes that were determined.  This should give some FHA borrower’s the ability to qualify for an FHA loan that previously could not due to COVID.

These new exceptions apply to the following types of income

  • Employed Variable Base Pay
  • Employed Overtime / Bonus / Tips
  • Employed Commission
  • Self Employed Income

Mortgagee letter 2022-09 also reviews the reduced time frames needed if a borrower was completely out of work due to COVID and now has returned to the workforce. 

Check out our video on the topic, and if you want tools to help you meet these new requirements from FHA check out IncomeXpert

Cheers!