Mortgage With Short Employment History Lending Guidelines

In this blog, we will discuss and cover getting a mortgage with short employment history and employment gaps. Most mortgage programs require applicants to provide two-year employment history. That means supplying a pay stub showing your year-to-date income as well as W-2 forms covering two years of employment.

A two-year employment history does not necessarily mean two consecutive years at the same job. You can have gaps in employment and/or multiple jobs in the most recent two years and still qualify for mortgage approval. If there are gaps in your most recent two years of employment, you’ll need to disclose your prior job history. Suppose that you’ve had your current job for a year. And that before that, you were out of the workforce for a year. And before that, you had a different job. You’ll need to go back three years to come up with a two-year job history on your mortgage application.

In some cases, you can have as little as 12 months of employment history and still qualify for a home loan. Suppose that you graduated from college and began your career a year ago. Some programs will count your last year of college as work experience.

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Mortgage With Short Employment History With Less Than Two Years

Applicants with gaps in their employment can qualify for a mortgage. It’s not uncommon for people to exit the workforce to go back to school, have a child or deal with medical issues. These things don’t have to prevent mortgage approval as long as you can show three things: that your income is sufficient to qualify for a mortgage, that it’s reliable, and that it’s ongoing. If you can demonstrate those things, you can get approved for a mortgage with employment gaps.

Mortgage Guidelines on Gaps In Employment

There are rules and regulations when it comes to gaps in employment. Homebuyers can qualify for a mortgage with a full-time job that has not been seasoned for two years. You do not have to be employed on the same job for the past two years prior to applying for a mortgage. You can have multiple jobs in the past two years. You can also have gaps in employment in the past two years.

If your employment gap is six months or less, you’re eligible for most mortgage programs if you have a full-time job and can provide pay stubs covering 30 days of wages. If you have been unemployed for six or more months, then you’ll have to work for at least six months at your new job before most lenders will consider you for a home loan.

It’s a good idea to prepare an explanation for long or multiple employment gaps. If you lost a job through no fault of your own or left the workforce as part of a plan, informing your lender can only help your cause. Lenders that require borrowers to be employed on the same job for the past two years of applying a mortgage are not going by the agency guidelines. Lenders can have overlays on requiring borrowers be employed on the same job in the past two years. Speak With Our Loan Officer for Mortgage Loans

Can I Get a Mortgage With a Part-Time or Second Job?

In order to use part-time income or second full-time job income, you normally need to work your part-time job and/or second full-time job for at least two years. You’ll provide pay stubs with year-to-date information as well as two years of W-2 forms. Lenders normally average income from part-time, seasonal, or hourly work as long as it’s stable or increasing.

Borrowers with multiple part-time jobs can use the cumulative total of all part-time wages for qualified income if they had been on the part-time jobs for two years. Part-time jobs that have been seasoned for two years or longer can be used to qualify for a mortgage.

If you have two full-time jobs you want to use to qualify for a mortgage, you need to have worked on both full-time jobs for two years. You can use one full-time job but if you are working two full time times, you need to have been working both jobs for two years.

Can I Get A Mortgage With Declining Income?

If your income has declined, lenders will want to make sure that your earnings are stable. and your job is safe. How healthy is your company? Your industry? Your position? If you earned less because you chose to work less, explain this. If you have good information about your company’s earnings, your performance reviews, or anything that will convince a lender that your job is safe, make sure your lender gets it.

Will Lenders Count My Higher Income After a New Promotion?

If you are paid hourly and your hours vary from week to week, lenders average your income over the last two years. But if your hours per week do not vary, your lender calculates your income based on your higher hourly rate. If you are promoted from hourly to a full-time salaried position, lenders do not average your income. They use the new salary. This holds true as long as the full-time status can be verified through an employment offer letter and/or verification of employment.

Can I Get a Mortgage With Multiple Job Changes?

If you’re a job-hopper, lenders will look closely at your employment history to make sure that your income is stable and ongoing. Multiple job changes are not necessarily bad. However, the nature of the jobs you choose can help you or hurt you when applying for a mortgage. Bob has had four jobs in the last two years. He worked as a personal trainer for six months, then in a coffee shop for nine months, then drove a cab for three months, and has worked in his current job in a retail store for five months.

When underwriters evaluate employment history and income, they look for stability through the past work history, and the likelihood to continue employment. The likelihood for continued employment for the next three years will determine the borrowers’ ability to repay their new housing payment.

Bob’s income has declined slightly and he has a one-month employment gap. This could hurt him if there are any other weaknesses in his file, such as a low credit score. Beth has also changed jobs several times. She started as a restaurant server and then moved into the business office as a bookkeeper. She was promoted to an accountant after a year and then changed companies to take a similar position with a higher salary. Job changes are viewed as positive if they come with increasing responsibility and/or pay. Click here to get a mortgage with multiple job changes

Can I Get a Mortgage With a Recent New Job?

You can get a mortgage with a new job if you did not have a gap exceeding six months. You just need to receive your first paycheck within 30 days of closing your loan. You’ll submit your offer letter from your employer when applying for a mortgage. It should specify your job title, start date and pay. The lender will probably also verify your new job directly with your employer.

Related: Job Relocation Guidelines

Can I get a Mortgage With a Short Employment History?

Most mortgage programs require at least 2 years of employment history. However, you may be able to qualify for a mortgage with a shorter history if you have “compensating factors” that make you a more attractive borrower.

Supposing that you’re a recent college graduate and you’ve been at your first job for a few months. If you are working in the field for which you trained, your education will usually count as work experience.

New grads usually have little trouble with mortgage eligibility even in new jobs. If you have a recent job change and you’re in a different field, write a letter explaining how the two obs are similar and how the change enhanced your career prospects. For instance, if you worked as a journalist and switched to advertising, Keep in mind that the above only applies to salaried, full-time work. You’ll likely need at least two years of reliable income if you mainly earn bonuses, overtime, commission, or self-employment income. And if you take on a second, part-time job for extra earning, you’ll need a two-year history for lenders to consider it.

Mortgage With Short Employment History Questions? Leave it to Us

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Gustan Cho Associates are mortgage brokers licensed in 48 states including Washington, DC, Puerto Rico, and the U.S. Virgin Islands with over 210 wholesale mortgage lenders. Over 80% of our borrowers are folks who could not qualify at other mortgage companies due to the lender having overlays.

Gustan Cho Associates has a national reputation of being able to do mortgage loans other lenders cannot do. We have a no lender overlay business platform on government and conventional loans.

2 Year Employment History Mortgage Guidelines

There are mandatory 2 Year Employment History Mortgage Guidelines required by all borrowers. To qualify for mortgage loans in the United States, lenders require a two-year residential and 2-year employment history under 2 Year Employment History Mortgage Guidelines. Mortgage Borrowers do not have to have a 2-year employment history with the same job to qualify for a mortgage. Borrowers can also have gaps in employment as well as employment in different lines of work. But all borrowers do need an overall 2-year employment history.

Case Scenario of Mortgage With Short Employment History With Multiple Jobs

For example, let’s take a case scenario:

if the home buyer were employed as a cook from January 2016 until January 2017
has been laid off until July 2017
But starting a new line of work in July 2017
Is still currently employed with the job they started in July 2017
This borrower will qualify for the 2-year employment history mandatory requirement even though they had a period of employment gap and have changed lines of work
What lenders are looking for is two-year overall employment history and NOT the past two years of straight employment

Besides a 2-year employment history, mortgage lenders require a two-year residential history as well.

Exception For Mortgage With Short Employment History

There is an exception for not having a 2-year employment history for prior full-time students. Homebuyers who have been in schools such as a technical school, junior college, college, graduate school, or professional schools such as dental, medical, business, or law school can use their full-time period in school in lieu of employment history. In lieu of the two-year history, lenders can take college transcripts, and the time they were in school is counted towards work history. For example, say a high school graduate goes to college for 4 years. He then goes to medical school for another 4 years.

Mortgage With Short Employment History For Recent College Graduates

Let’s just assume that the student does not have a job and does not have any work experience. The student graduates from medical school and gets a new job making $100,000 per year. This medical student will qualify for a mortgage. Needs to provide an offer employment letter. 30 days paycheck stubs prior to CTC as a doctor. The prior two years he has been a full-time medical school student will be counted towards his 2-year employment history requirement. Click here to get a mortgage with multiple job changes

Recent Immigrants And Those Who Just Got Green Card

There are cases where people have lived in this country illegally where they just got their green card. These folks may have been employed by an employer and have gotten paid cash in lieu of W-2 or 1099 wages. Then they get a green card and continue on working for the same employer but now get paid via W-2 wages and gets taxes deducted from their employer.

Technically, they do have a two-year employment history. However, the work history that they have worked for their employer where no income was documented does not count. It cannot be used towards the mandatory 2-year employment history requirement due to the fact that no taxes were deducted and the fact that they were in this country illegally.

What Is a Short Work History on Mortgage With Short Employment?

The 2-year employment history time clock starts the date they have gained employment legally and their income is reported to the Internal Revenue Service. These folks cannot qualify for a residential mortgage loan until they have 2-year employment history documented.

Borrowers can qualify for a mortgage with short employment history. You do not need a two year work history with the same job to qualify for a mortgage.

There is an alternative finance program for those illegal residents who have just gotten a green card or for those homebuyers who just came to this country. It is a portfolio mortgage loan program called the expatriate portfolio mortgage loan program and is available to qualified mortgage loan borrowers.

Expatriate Mortgage Loan Programs

For those illegal immigrants who just got a green card and are legal to work and those new immigrants who just got a job in this country, the Expatriate mortgage loan program is probably the only program that they will qualify for. However, lending standards and guidelines are tough.

The expatriate mortgage loan borrower needs to put in a 20% down payment. Need to provide proof that they are employed by a U.S. Company. Show proof of income from a U.S. company. The maximum debt to income ratio is capped at 43%. The expatriate mortgage loan borrower needs to show that he or she has assets and compensating factors.

A one-year reserve of principal, interest, taxes, and insurance is required besides the 20% down payment. The expatriate mortgage loan program is 30-year adjustable-rate mortgages. There are the 3/1 ARM, 5/1 ARM, and 7/1 ARM expatriate mortgage loan programs. Expats can refinance to a government and/or conventional loan after they have been legally employed in the U.S. for two years. Click here to get a mortgage with low credit scores

Frequently Asked Questions (FAQs)

Can I get a mortgage with a short employment history?
Yes, obtaining a mortgage with a short employment history is possible. Still, it may be more challenging and require additional documentation or a co-borrower.
What is considered a short employment history?
A short employment history typically refers to a period shorter than lenders typically prefer to see, often around two years of steady employment.
How does a short employment history affect my mortgage application?
A short employment history can impact your mortgage application by raising concerns for lenders about your stability and ability to maintain consistent income to repay the loan.
Will I need to provide additional documentation if I have a short employment history?
Yes, you may need to provide additional documentation, such as proof of income, employment contracts, pay stubs, and letters of explanation for any gaps in employment.
Can I use income from a new job for a mortgage application?
Using income from a new job for a mortgage application is possible. Still, lenders typically prefer a stable employment history with the same employer for at least two years.
Will my employment history affect the interest rate or terms of the mortgage?
A short employment history may result in higher interest rates or less favorable terms, as lenders perceive it as a higher risk.
Can I qualify for a mortgage with a co-signer if I have a short employment history?
Having a co-signer with a strong employment history and income may increase your chances of qualifying for a mortgage with a short employment history.
What if I’m self-employed or have an irregular income?
Suppose you’re self-employed or have an irregular income. In that case, you may still qualify for a mortgage. Still, you’ll likely need additional documentation, such as tax returns and profit/loss statements, to demonstrate your income stability.
Should I wait until I have a longer employment history before applying for a mortgage?
Depending on your situation, it might be advantageous to wait until you’ve established a longer employment history before seeking a mortgage. Doing so can enhance your likelihood of approval and enable you to obtain more favorable terms.
Is it possible to enhance my likelihood of mortgage approval despite having a brief work history?
Yes, you can improve your chances of mortgage approval by maintaining a stable income, minimizing debt, accumulating funds for a larger down payment, and collaborating with an experienced mortgage lender who can assist you throughout the process.