FHA Loans After Unemployment With Gaps in Employment
In this blog, we will cover and discuss qualifying for FHA loans after unemployment with gaps in employment mortgage guidelines. Homebuyers can now qualify for FHA Loans After Unemployment and gaps in employment. Many people are under the assumption you need two years of work experience on the same job without any employment gaps. HUD, the parent of FHA, sets the agency mortgage guidelines on FHA loans. Per HUD Agency Guidelines, borrowers can have gaps in employment in the past two years and qualify for a mortgage.
How Many Jobs Can You Have In The Past Two Years To Get an FHA Loan?
There are no limits on how many jobs you can have in the past two years. The salary of the newest full-time job will be used as the qualifying income. If a borrower had a gap in employment of six months or less, there is no waiting period on the new job to qualify for an FHA loan. However, most lenders will require 30 days of paycheck stubs for the borrower to be able to close on their loan. A written letter of employment and a verification of employment will be required by the employer.
If the borrower had a gap of employment greater than six months, the borrower needs to wait six months on his new full-time job for them to qualify for a mortgage. Borrowers can have gaps in employment in the past two years and change careers to a different field and qualify for a mortgage.
Qualifying For An FHA Loan With Gaps In Employment In The Past Two Years
Many home buyers just assume that Borrowers cannot qualify for FHA Loans After Unemployment unless they have been in their current jobs for two years. This is not the case under HUD 4000.1 FHA Guidelines. Borrowers can qualify for FHA Loans After Unemployment as well as gaps in employment without being at their current jobs for two straight years. FHA Guidelines On Gaps Of Employment are specific. HUD does not require two continuous years of employment.
How Long Do You Have To Be Employed To Get an FHA Loan?
HUD just requires two-year employment history. Gaps in employment in the past two years are allowed. I get asked this question several times a week from homebuyers who need to qualify for a mortgage. Lenders require two years of tax returns and two years of employment history. How about on cases where a mortgage loan borrower has been laid off during the past two years. Fannie Mae and Freddie Mac have the same guidelines on gaps in employment on conventional loans as HUD Agency Guidelines.
Can I Get an FHA Loan If I Changed Jobs To a Different Field?
HUD and other mortgage agencies normally prefer borrowers to be in the same field if they change. However, that is not required. There are many cases where people change jobs to a totally different field. For example, we have many teachers, police officers, firefighters, and other public service workers who either retire and/or change fields to the private sector in a totally different field.
Can I Have Employment Gaps In The Past Two Years To Get an FHA Loan?
You can have gaps in employment in the past two years and qualify for conventional loans. As with FHA loans, if the borrower has been unemployed for six or more months, the borrower needs to be on the new job for six or more months. If the employment gap was less than six months, then there is no waiting period after getting a new job on conventional loans
Mortgage After Unemployment of More Than 6 Months
If a borrower has been laid off for less than six months, the borrower will qualify without any problems. The borrower can be laid off for no more than six months and just started a job with another company, the borrower will have no problem qualifying for a mortgage loan. The borrower can even be in a different line of work. All that is needed is 30 days of paycheck stubs from their new employer prior to closing on the mortgage.
FHA Loan With Multiple Jobs and Employment Gaps In The Past Two Years?
For example, here is a case scenario:
- If the borrower was a school teacher for over 20 years
- Got laid off six months or less
- Just got a job as an automobile mechanic
- The borrower can still qualify for a mortgage loan
- The new pay as the auto mechanic will be used as the new income
- An offer letter of employment is normally required
They can still qualify for a mortgage even though there was a gap in their employment history in the past two years.
What Is An Overlay On a Home Loan?
Lenders need to have their borrowers meet the minimum agency mortgage guidelines of FHA, VA, USDA, Fannie Mae, and Freddie Mac. All agency guidelines state borrowers can qualify for a mortgage with gaps in employment in the past two years. However, individual mortgage lenders can have their own lending requirements that are higher than the minimum agency guidelines called lender overlays. Most lenders will impose lender overlays. It is up to the lender the kinds of overlays they want to impose on their borrowers.
Different Mortgage Lenders Have Different Requirements?
Most lenders have lender overlays on employment gaps. They require borrowers to have zero employment gaps in the past two years in order to qualify with them. This holds true even though FHA, VA, USDA, Fannie Mae, and Freddie Mac allow employment gaps. This is called lender overlays on gaps of employment by lenders. Gustan Cho Associates has no lender overlays on government and conventional loans.
Case Scenario on Getting an FHA Loan After Unemployment With Extended Unemployment
For cases where the mortgage loan borrower has been unemployed for six or more months, mortgage lenders want to see a six-month continuous job history before qualifying them for a mortgage home loan. Here is a case scenario:
- So in the event, that the school teacher has been unemployed for one year
- Just got a job as an automobile mechanic recently
- He or she must work on their current job for a period of six months before they would qualify for a mortgage loan
If you have any questions and have been previously unemployed and just started a new job and want to see if you qualify for a mortgage, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] Our team of mortgage professionals can go over options and work together in getting a mortgage after unemployment. We also have access to NON-QM Loans and alternative financing solutions such as bank statement mortgage loans.
This article on FHA loans after unemployment was updated on July 25th, 2022.