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A dependable income is a must for getting a mortgage. Lenders want evidence that youll be able to repay a loan, so typically they like to see a steady two-year work history with a stable or rising income.
“The more consistent your job and work history are, the better,” Scott Lindner, national sales director at TD Bank, said via email.
But that doesnt mean any kind of job change or employment gap will sink an application. Heres what to know about qualifying for a mortgage if your work history is a little outside the box.
Getting approved for a mortgage loan often requires proving you have stable employment and income. While lenders typically want to see two years of job history, the specific employment requirements can vary depending on your situation
As a first-time homebuyer in 2024, understanding mortgage employment rules is key to navigating the loan process smoothly. This guide covers everything you need to know.
Why Employment History Matters to Mortgage Lenders
When reviewing a mortgage application, lenders need to confirm the borrower has the means to repay the loan. Looking at your employment provides proof of a steady income source.
Specifically, lenders want reassurance that:
- Your income is consistent and reliable
- You are qualified for your job and less likely to be terminated
- You have the skills to remain employed long-term
Gaps in employment or changing jobs frequently may raise concerns about the stability of your income. That’s why most lenders look for around two years of steady work history.
Typical Requirements for Job History
Many conventional lenders require you to be at your current job for at least 6-12 months They also want applicants to show
- 2 years of employment in the same line of work
- 2 years of reliable income sources like overtime and bonuses
So even if you’ve changed jobs, as long as you remained in the same field, lenders can often count that towards the 2-year history Jumping between unrelated industries is more problematic
For example, an accountant changing accounting jobs would likely be fine. But going from accounting to bartending to marketing raises red flags.
Options for Meeting Work History Requirements
If you don’t have a full two years of employment history, don’t panic. You still have options, such as:
Providing explanation letters
Write letters explaining gaps or changes in employment. Tie together how your past experience applies to your new role.
Using your education
Relevant education like degrees or certificates can count towards work history for recent graduates.
Finding alternative lenders
Some lenders are more flexible about employment requirements. Shop around to compare programs.
Applying with a co-signer
A co-signer with good credit and income may help you qualify if you have limited job history.
Using non-employment income
Income from sources like alimony, child support, rental properties, or assets could potentially help you qualify.
Requirements by Type of Mortgage
Employment requirements can vary depending on which mortgage program you use. Here’s an overview:
Conventional Loans
- Typically require 2 years of related job history
- 6-12 months at current job may be needed for recent changes
FHA Loans
- Need 2 years of employment, schooling, or military service
- Explain any gaps over 6 months
- 2 years proof needed for variable income like overtime
VA Loans
- 2 years of employment, schooling, or military service
- Active duty must be 12+ months from discharge
USDA Loans
- No minimum time in current role
- Must document 2 years of work history
So government-backed mortgages like VA and USDA loans tend to be more flexible than conventional loans when it comes to employment history requirements.
Options for Special Employment Situations
If you’re in one of these situations, here are some tips:
New job
Provide offer letter, pay stubs, verification of employment. Pick a lender that works with short job history.
Self-employed
Show 2 years of reliable income on tax returns. Have a solid explanation for any gaps or changes.
Part-time job
Some lenders may work with you, but check requirements. Provide hours and history of employment.
Between jobs
Get an offer letter from new employer. Provide pay stubs once started. Maintain strong credit.
The bottom line is proving to lenders you have stable, ongoing income through documentation and explanations.
FAQs on Job History and Mortgage Loans
Can you get a mortgage without a job?
It’s challenging but possible by using income like alimony, assets, rental properties, etc. Prepare to provide substantial documentation.
Can you buy a house with a new job?
Yes, some lenders will work with less than 2 years at a job, especially if it’s in the same field. Strong credit and finances help.
How long do you have to work to get a mortgage?
Many lenders want around 2 years of consistent employment. But other factors like credit can compensate for shorter job history.
Can I change jobs when buying a house?
Yes, but inform your lender and provide documentation like offer letters, pay stubs, and verification of employment.
Key Takeaways
While lenders often want two years of steady employment, don’t assume you’re disqualified with a shorter history. Mortgage requirements are flexible for certain situations. The keys are:
- Explaining employment gaps or changes
- Providing proof of ongoing income
- Maintaining good credit and finances
- Finding the right lender for your particular circumstances
With the proper documentation and clarity around your job history, you can still get approved for the mortgage loan you need to buy your dream home.
Job or career change
You dont have to stay in the same job, or even in the same career, for two years to get a mortgage.
“Its not as important that an applicant have a specific job or be on the same career path,” Lindner said. “What is important is providing proof of consistent income during the transition.”
So if your income remains steady or increases, switching jobs before you apply for a mortgage shouldnt hurt your chances.
However, a change in the type of pay, such as a recent move from a salaried position to a commission-only or self-employed role, would make qualifying tougher. To count self-employed, commission or overtime pay, a lender usually wants to see a full two-year history of that type of income to get a reliable average, says mortgage broker Channing Moore, owner of Bayou Mortgage in Lake Charles, Louisiana.
Another complication would be a job change during the mortgage application process. If that happens, call your lender right away.
“If youre a conventional borrower, you can usually produce a pay stub [from the new job] or even an offer letter, and you may be OK,” Moore says. With a government-backed loan, “youll need 30 days of paystubs to move forward.”
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Self-employment
Self-employment isnt a roadblock to a mortgage as long as you can prove a history of steady income from your business. Lenders generally want to see two years of business tax returns, year-to-date profit and loss statements, and sometimes business bank statements, Lindner said.
“As with any borrower, self-employed professionals can increase the chances of qualifying for a mortgage by keeping an eye on their credit score, monitoring their debt-to-income ratio and getting their paperwork in order to submit with a lender,” he added.