Two Year Work History Mortgage Guidelines And Employment Gaps

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Two Year Work History Mortgage Guidelines And Employment Gaps

This BLOG On Two Year Work History Mortgage Guidelines And Employment Gaps Was UPDATED On April 26th, 2019

Two Year Work History Mortgage Guidelines And Employment Gaps

By Gustan Cho

To qualify for a residential mortgage loan, two things are mandatory:

  • Per Two Year Work History Mortgage Guidelines, 2 year employment history is required
  • 2 year residence history is also required
  • There is only one exception to the 2 year employment history
  • Borrowers who have been in school full time, the schooling is considered the same as employment history per Two Year Work History Mortgage Guidelines
  • School transcripts is required to be provided to lender
  • The following is considered to full time schooling:
    • Vocational school
    • Trade school
    • College
    • Graduate school
    • Law School
    • Medical School
    • Dental School Veterinary School
    • Certification schools such as beautician schools, police and fire academies
  • Professional school transcripts can be used in lieu of the 2 year employment history requirement per Two Year Work History Mortgage Guidelines
  • For example, here is a case scenario:
    • home buyer went to college right out of high school
    • then went on to graduate school
    • had not had a single job
    • but just got a job after graduating graduate school
    • that home buyer will qualify for a mortgage even though he has not worked a day in his life
  • His past two years graduate school transcripts will serve as his 2 year employment history
  • High school graduates can qualify for mortgage once they are 18 years old
  • Full time schooling in high school is considered a full time schooling

2 Year Residential History

2 Year Residential History

Besides two year employment history, home buyers needs two year residence history as well.

The mortgage loan applicant can be living with family or renting his or her own home but the two-year residential history is required and needs to be documented.

Two Year Work History Mortgage Guidelines With Job Gaps

Two Year Work History Mortgage Guidelines With Job Gaps

Two Year Work History Mortgage Guidelines does not mean that borrowers need straight 2-year continuous employment history.

  • Borrowers can be employed currently for six months and they could have been unemployed for the past 3 years
  • However, they would need the 18 months of prior employment history prior to his unemployment
  • Lenders just want to see borrowers been employed for 2 years
  • This is whether it has been continuous and/or there were employment gaps and/or multiple jobs
  • This is the minimum mandatory guidelines set by HUD and Fannie Mae
  • Individual lenders may have their own overlays that surpass the minimum federal guidelines
  • For example, many banks, credit unions, mortgage lenders do have their own mortgage lender overlays where there cannot be any gaps in employment for the past two years
  • Many lenders do not like job hoppers in the past two years
  • This is not a federal mortgage guideline but their own lender overlays
  • For example, all that is required to qualify for a borrower via federal mortgage guidelines to get an approve eligible per DU FINDINGS for mortgage is the following:
    • borrowers have been unemployed for six months or less and just got a new full-time job need 30 days of paycheck stubs from a new employer in order to close on a mortgage loan
    • If unemployed for six or more months, then need to have been on a new job for at least six months to qualify for mortgage
  • Banks and credit unions may have overlays
  • They may require that borrowers been employed with the same employer for the past two years
  • Or if borrowers had a job switch they need to have switched jobs in the same line of work
  • Those denied or told they do not qualify for this reason, contact us at The Gustan Cho Team
  • The Gustan Cho Team has no lender overlays on government and conforming loans

Cases Where Home Buyers Cannot Prove 2 Year Employment History

Cases Where Home Buyers Cannot Prove 2 Year Employment History

There are cases where a home buyer cannot prove the 2-year employment history.

  • For example, if an immigrant comes to this country and lands a good paying job and just got his or her green card, they do not have 2-year employment history so they could not qualify for a conforming mortgage loan even though they can afford the housing payments
  • They would have to wait 2 years and get 2-year employment history seasoning in order for them to qualify for a residential mortgage loan

Other common cases are when a worker works full time and have been working full time in this country but had no green card.

  • The employer paid them cash so there is no documented income
  • The worker then gets legal and gets a green card and social security card and the employer now pays them via payroll check and are now classified W-2 employee status
  • Even though the worker has worked for many years for his employer, he cannot qualify for a residential mortgage loan due to not having documented income even though he has a 2-year employment history

Mortgage Loan Program For Those Without 2 Year Employment History

Mortgage Loan Program For Those Without 2 Year Employment History

I can offer home buyers needing a mortgage loan without the 2-year employment history via our alternative portfolio mortgage loan program.  However, to qualify for the expatriate portfolio mortgage loan program, the mortgage loan borrower needs to have a 20% down payment, a maximum debt to income ratio of 40%, and one year’s reserves for principal, interest, taxes, and insurance.  The expatriate portfolio mortgage loan program is a 30-year adjustable rate mortgage program available as 3/1 ARM, 5/1 ARM, and 7/1 ARM.

Related> Mortgages and work history

Related> Mortgage qualifications for buying a home 

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