2 Year Employment History
By Gustan Cho
One of the mandatory requirements to qualify for a residential mortgage loan, whether it is FHA or Conventional, mortgage lenders require a 2 year employment history. However, both HUD and Conventional mortgage lending guidelines do not require that you have been continously employed by the same employer for the past 2 years. HUD, Fannie Mae, Freddie Mac, VA, USDA all require that you just provide a 2 year employment history on your mortgage application and gaps in employment is allowed as well as multiple jobs in the past 2 year employment history. Many mortgage loan applicants are told by banks, credit unions, and mortgage bankers that they do not qualify for a residential mortgage loan because they have not had been employed for two years by the same employer. This can be true for a bank, credit union, mortgage banker, or other mortgage lender who have their own criteria, called mortgage lender overlays, which are lending requirements and guidelines that surpasses the minimum federal mortgage lending guidelines that is set by FHA, VA, USDA, Fannie Mae, and Freddie Mac. Portfolio and non-conforming mortgage lenders can have their own set of rules and lending criteria, again called mortgage lender overlays, for their mortgage loan applicants.
What Are Minimum Mortgage Lending Guidelines When It Comes To 2 Year Employment History?
In general, a mortgage loan applicant needs to provide 2 year employment history but if the mortgage loan applicant has been unemployed for a period of time, the employment history prior to the mortgage applicant’s unemployment needs to be provided. If a mortgage loan applicant has been unemployed for more than six months and has a new full time job, then the mortgage loan applicant needs to be in his new full time job for at least six months in order to qualify for a residential mortgage loan. If the mortgage loan applicant has been unemployed for six or less months and has gotten a new full time job, then the mortgage loan applicant will qualify for a residential mortgage loan, however, cannot close on his or her mortgage loan until 30 days of paycheck stubs has been provided to the mortgage lender and a written verification of employment stating that the mortgage applicant’s job stability will likely to continue for the next three years.
If the mortgage applicant got a new job and has been on the job for at least six months but has been unemployed for one year, then 18 months of his or her employment history needs to be provided prior to his or her unemployment status.
Why Do Lenders Have Overlays On Longevity On Job?
Mortgage lenders like to see job longevity because statistics prove that longevity on a job means job and income stability. Many mortgage lenders view job hoppers as instable with regards to job security and income security. All mortgage lenders do want to see that a mortgage loan applicant has been in the same job for at least the past two years but what they want to see and the real reality is different. Again, HUD ( Parent of FHA ), VA, USDA, Fannie Mae, Freddie Mac do not require 2 years employment history where the mortgage loan applicant needs to be with the same employer. All they require is 2 year employment history and employment gaps and multiple jobs are allowed. If you are told that you do not qualify for a residential mortgage loan by a bank, credit union, or mortgage company because you do not have 2 year employment history from the same employer, find a different mortgage company.