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Employment Gaps and Mortgages. Can you still get a loan?

Most lenders do want to see a two year consistent employment history

However, having two years employment history is not always mandatory depending on the loan program.


I originate and close on mortgage loans for borrowers who have employment gaps all the time. There are some banks and mortgage companies that have lender overlays where they will require that borrowers be in their same jobs for the past two years however, this is not a federal guideline. Borrowers can have multiple jobs and employment gaps in the past two years and still qualify for home loans.


Letter Of Explanation For Employment Gaps

If mortgage loan applicants have employment gaps, the underwriter will need a letter of explanation as of why they had employment gaps:

Again, those who were consistently employed for two years with more than one job, there is no issue with qualifying for mortgage loan.

However, If borrower had six or more months in employment gaps, then they need to be with a full time job for at least six months to qualify for mortgage loan. If the borrower had employment gaps for less than six months, then they can qualify for mortgage with new full time job the borrower will just need full time employment offer letter or they will need 30 days of paycheck stubs with current employer to get clear to close.


Reasons For Employment Gaps

There are various reasons for gaps in employment:

There are many reasons why people have employment gaps. It can be maternity leave, personal time off due to divorce, death in the family, moving to another geographic area, military deployment or being in school full time. Some folks decide to work part time and that part time job turned into a full time job. Mortgage Lenders want to feel confident that borrowers has solid stable job and income stability for the next several years where the mortgage loan does not go into default. Past work history is a good indicator of future job stability.


Does FHA Require Two Years Employment History?

The Federal Housing Administration does not require two years of continuous employment history. Two years overall employment history is required on all loan programs.

Full time schooling counts as full time employment history. Some borrowers feel that they do not qualify for a mortgage loan because they have extended employment gaps, they had short term jobs or job hopped. As long as borrowers can show six months of full time of continuous employment history and can get a verification of employment from employer that the likelihood of continuous full time employment is promising, borrowers will qualify for a mortgage loan. We do need to document two years employment history but the employment history does not have to be continuous


Lending Guidelines On Employment History

The following is from the United States Housing and Urban Development, HUD Handbook 4000.1 says about income and employment stability for mortgage loan borrowers:

“To be eligible for a mortgage, FHA does not require a minimum length of time that a borrower must have held a position of employment. However, the lender  must verify the borrower’s employment for the most recent two full  years…”

Employment gaps longer than a month do require a letter of explanation as mentioned earlier. In the event the employment gaps was caused by full time schooling, then transcripts need to be provided to the mortgage underwriter. The probability of continued full time employment is the most important concern mortgage lenders have. The past employment history is used as an indicator of continued full time employment


Employment And Changes In Employment

HUD also recommends that underwriters should favor mortgage loan applicants who changes jobs often within the same employment field due to the following:

Income and benefit considerations such as job promotions or advancement in their fields.


Employment Gaps For Conventional Loans

Conventional mortgage lenders are slightly more strict when it comes to employment gaps.

Most conventional mortgage lenders do want to see continuous full time employment. However, employment gaps is not a deal breaker and employment gaps under six months are allowed with only the most recent pay check stub from the new employer. Employment gaps of six or more months, the borrower will need to provide proof of six or more months in their current job.


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