Can I Qualify For A Mortgage With Employment Gaps In Past Two Years?

Most mortgage lenders do want to see a two year consistent employment history, however, having a consistent of two years employment history is not a deal killer.  I originate and close on mortgage loans for borrowers who have employment gaps all the time.   Having a two year, with employment gaps, may be a particular mortgage lender overlay but it is not a mandatory Fannie Mae, Freddie Mac, VA, USDA, or FHA guidelines.

Letter Of Explanation For Employment Gaps

If you did employment gaps, mortgage underwriters will need a letter of explanation as of why you had employment gaps. Again, if you were consistently employed for two years, you have no problem, however, if you only have been employed the past six months and been unemployed for over a year or took time off for over a year, then a letter of explanation is required.  There are many reasons why people have employment gaps.  It can be maternity leave.  It could be personal time off due to divorce or death in the family.  It can be military deployment or being in school full time.  Some folks decide to work part time and that part time job turned into a full time job.  The main concern mortgage lenders have is that the mortgage loan borrower has income stability at the time they apply for a mortgage as well as job and income stability for the next several years where the mortgage loan does not go into default.  Past work history is a good indicator of future job stability.

Does FHA Require Two Years Employment History?

The Federal Housing Administration does not require two years of continous employment history.  Many mortgage loan borrowers feel that they do not qualify for a mortgage loan because they have extended employment gaps  or because they had short term jobs or job hopped.  As long as you can show six months of full time of continous employment history and can we can get a verification of employment from your employer that the likelihood of continous full time employment is promising, you will qualify for a mortgage loan.  We do need to document two years employment history but the employment history does not have to be continous.

Lending Guidelines On Employment History

The following is from the United States Housing and Urban Development, HUD,  Handbook 4155.1, Chapter 4, Section ‘D’ says about income and employment stability for mortgage loan borrowers:

“To be eligible for a mortgage, FHA does not require a minimum length of time  that a borrower must have held a position of employment. However, the lender  must verify the borrower’s employment for the most recent two full  years…”

Employment gaps longer than a month does require a letter of explanation as mentioned earlier.  In the event if employment gaps was caused by full time schooling, then transcripts need to be provided to the mortgage underwriter.

The probability of continued full time employment is the most important concern mortgage lenders have.  The past employment history is used as an indicator of continued full time employment.

Employment And Changes In Employment

HUD also recommends that mortgage loan underwriters should favor mortgage loan applicants who changes jobs often within the same employment field due to income and benefit considerations such as job promotions or advancement in their fields.  Bottom line is that HUD encourages job hoppers when it comes to FHA mortgage loan qualifying purposes.

Employment Gaps For Conventional Loans

Conventional mortgage lenders are slightly more strict when it comes to employment gaps.   Most conventional mortgage lenders do want to see continous full time employment, however,  employment gaps is not a deal breaker.  Any employment gaps under six months is allowed with only the most recent pay check stub from the new employer.  Any employment gaps of six or more months, the mortgage lender wants to see six or more months in their current job.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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