How Do Mortgage Lenders View Periods Of Unemployment?

How Do Mortgage Lenders View Periods Of Unemployment?

This BLOG On How Do Mortgage Lenders View Periods Of Unemployment Was UPDATED On January 7th, 2018

Qualified income is extremely important when qualifying for a residential home loan. Can mortgage borrowers qualify with gaps in employment in the past two years? The answer to the above question is an absolute YES.

  • Most mortgage lenders do want to see a solid two year full time work history from the same employer
  • However, that is not often the case with some home buyers
  • Mortgage lenders can have their own mortgage lender overlays and require two years continuous work history with no gaps in employment history but there are mortgage lenders that will be lenient with gaps in employment history as long as  the mortgage loan borrower has had a prior two year work history
  • The mortgage loan borrower can be off work for a year and still qualify for a mortgage loan as long as he or she has been employed for at least six months
  • Any gaps in employment history six months or under require no seasoning requirement with the new job as long as they can provide a recent paycheck stub and verification of employment that states that the borrower’s employment is likely to continue

How Do Mortgage Lenders View Periods Of Unemployment: Case Study On A Recent Closing

I just closed on a mortgage loan where the home buyer has gotten a mortgage loan denial by several mortgage lenders due to having gaps in employment history.

It was an extreme case and a great example on how I can get mortgage loan approvals for borrower’s who has gotten denied for a loan for having gaps in employment

Here is the case scenario:

  • My borrower has taken 9 months off work in 2012 due to medical reasons
  • She then went back to work and quit her job in February of 2013 within three weeks of returning to work
  • Her hourly wage was $9.00 per hour
  • She then got another job in March of 2013 making $12.00 per hour
  • However, she only worked 20 to 30 hours per week due to her being on probationary basis
  • In September 2013 she completed the probationary period and was given a guaranteed 40 hours per week
  • She applied for a mortgage loan with me in November 15, 2013 after getting denied by many mortgage lenders due to her gaps in employment
  • I got a approve eligible via Fannie Mae’s Automated Underwriting System
  • I have wholesale mortgage lenders who have no lender overlays and the approve eligible DU FINDINGS is the mortgage approval so I knew I could get the deal done but I stll needed to get underwriting approval
  • The underwriter gave me thumbs up and got the deal approved
  • We used her current income of $12.00 per hour and we needed to verify two year employment history
  • Since she had a 9 month gap in employment back in 2012, we needed to get a verification of employment dating back to 2011 from a previous employer
  • Everything checked out and we closed the mortgage loan on January 10, 2014, last Friday

College Graduates Without 2 Year Employment History

How Do Mortgage Lenders View Periods Of Unemployment With College Students:

I deal with many first time home buyers who are first time home buyers but lack the two year employment history requirement.

  • The good news is that as long as the home buyer has been a full time student and just got a job, the two year employment history is waived
  • The time the home buyer was a full time student is counted the same as work experience

Gaps In Employment Guidelines On 1099 Wage Earner Versus W-2 Earner

Borrowers who are 1099 wage earners need two years of employment as a 1099 wage earner to qualify.

  • 1099 wage earners are considered self employed borrowers
  • Mortgage Guidelines state that for self employed borrowers, 2 years of income taxes is required
  • If a W-2 employee goes from a W-2 employee to a 1099 wage earner, that borrower needs two years employment history as a 1099 wage earner to qualify for mortgage
  • However, if a 1099 wage earner goes to a W-2 wage earner, then the two year requirement is waived and this borrower can qualify right away
  • 30 days of paycheck stubs and an offer employment offer letter is required to qualify

The Gustan Cho Team at USA Mortgage is a national direct lender with no mortgage overlays on government and conventional loans. We have no overlays with gaps in employment. Mortgage Borrowers do not need to be in the same job for the past two years to qualify for mortgage with us. Home Buyers and homeowners needing to qualify for a mortgage with a direct lender with no mortgage overlays on government and conventional loans, please contact us at 262-716-8151 or email us at We are available 7 days a week, evenings, weekends, and holidays.

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