How to Get a Mortgage With Short Employment History or Employment Gaps

This article is about getting a mortgage with employment gaps or a short employment history

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.

Get a mortgage quote now

Can I Get a Mortgage With Gaps in Employment?

Mortgage With Gaps in Employment

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. 

Related: How to Write a Letter of Explanation for Employment Gaps

There are rules and regulations when it comes to gaps in employment.

  • 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. 

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

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. 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?

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. His 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-ish 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 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. 

Can I Get a Mortgage With a 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 jobs 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 Qualification Questions? Leave it to Us

Mortgage Qualification Questions

Homebuyers who need to qualify for a mortgage with a national mortgage company licensed in multiple states with no mortgage overlays on government and conventional loans, please contact us at apply now. 

Comments: 57

Leave a comment