In this blog, we will cover and discuss the two-year work history mortgage guidelines and employment gaps to qualify for a mortgage loan. 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. For borrowers who have been in school full time, the schooling is considered the same as employment history per Two-Year Work History Mortgage Guidelines.
What Is Considered Full-Time Schooling When Applying For a Mortgage
Full-time schooling is considered as previous work experience. HUD, VA, USDA, Fannie Mae, and Freddie Mac are all considered full-time equivalent to full-time work experience. Two years of full-time experience and/or schooling is required to qualify for a mortgage. School transcripts are required to be provided to the lender. The following is considered 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
How Far Back Do Mortgage Lenders Look at Employment History?
In the following sections, we will cover the two-year history mortgage guidelines and employment gaps. 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. The home buyers 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 from 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 of graduate school transcripts will serve as his 2-year employment history. High school graduates can qualify for a mortgage once they are 18 years old. Full-time schooling in high school is considered full-time schooling.
2 Year Residential History
Besides two-year employment history, home buyers need two-year residence history as well. The mortgage loan application can be living with family or renting his or her own home but a 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 do 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. There are the minimum mandatory guidelines set by HUD and Fannie Mae.
Mortgage Lender Overlays on Gaps In Employment
Individual lenders may have their own overlays that surpass the minimum federal guidelines. For example, many banks, credit unions, and 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.
How Long of a Gap In Employment Can You Have To Get Mortgage
For example, all that is required to qualify for a borrower is via federal mortgage guidelines to get approve/eligible per DU FINDINGS for a 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 a mortgage
Banks and credit unions may have overlays. They may require that borrowers have 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 Gustan Cho Associates. Gustan Cho Associates has no lender overlays on government and conforming loans
Cases Where Home Buyers Cannot Prove 2-Year Employment History
There are cases where a home buyer cannot prove a 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 a 2-year employment history seasoning in order for them to qualify for a residential mortgage loan.
What Are Mortgage Guidelines For Non-Permanent Resident Alien?
Other common cases are when a worker works full time and has 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. The employer now pays them via payroll check and is now classified as 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
I can offer home buyers needing a mortgage loan without a 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.
This blog on Two-Year Work History Mortgage Guidelines with Employment Gaps Was Updated on September 26th, 2022
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September 26, 2022 - 5 min read