If you are among the tens of millions of Americans that lost their jobs due to COVID-19 related economic challenges, you may be wondering how long you have to wait after you return to work before you can get approved for a mortgage. As we explain below, for many people, the answer is a surprisingly short period of time.
As long as you have a one-to-two year continuous work history before you were unemployed and the gap in your employment is less than six months, then you should be able to qualify for a mortgage after returning to work for a month.
You are required to wait before you apply because mortgage lenders typically require pay stubs for the past month to confirm your current employment and income level. You may also need to submit an employment contract or letter that details your job terms including your income, title and how you are paid. Lenders also verbally verify your employment within ten days of your closing date to confirm your job status.
Review Employment History Requirements for a Mortgage
Keep in mind that full-time education and military service count as employment when you apply for a mortgage. So if you were a student and graduated from college but you were not able to find a job for several months due to COVID-19’s impact on the labor market, this guidelines applies to you. In this case, you may only need to work a month before you can apply for a mortgage. The same holds true if you were discharged from the military.
Please note that when it comes to qualifying for a mortgage, the shorter the gap in your work history, the better. If you were unemployed for less than a month, this is usually a non-issue if you meet the lender’s other qualification guidelines.
Use ourMORTGAGE QUALIFICATION CALCULATORto determine the loan you can afford based on your monthly income and debt payments
If your employment break is between one and six months -- regardless of if it is due to COVID-19 or other reasons -- you may need to provide a letter of explanation that addresses the issue. Your letter should be factual and to the point and explain the reason for the gap.
We should highlight that the waiting period and guidelines outlined above typically apply if you are a W-2 employee that is paid on an hourly wage or salary basis. If you are self-employed or a contractor or if you are paid primarily by commissions and/or bonus at your new job, then you may be required to wait one-to-two years to apply for a mortgage.
In short, the qualification requirements are more challenging for self-employed applicants or borrowers whose compensation mostly consists of commissions or a bonus. If you fall into these categories it can be very helpful if you have a multi-year track record of earning steady income -- as demonstrated by at least two years of tax returns -- before you were unemployed.
There are several other situations when you may be required to wait longer than a month to qualify for a mortgage, including the following circumstances:
If your job has a probationary or trial period you are usually required to wait until that period expires before you are eligible for a mortgage
If you change industries when you start your new job, you may also be required to wait
If you do not have a one-to-two year employment history prior to losing your job and returning to work, you may need to be employed longer to meet this guideline
In closing, if you lost your job or were furloughed due to COVID-19, the path to qualifying for a mortgage after you find a new job may be as short as a month.
If you have resumed work or are about to, we recommend that you contact multiple lenders in the table below to determine their employment qualification guidelines. You may be able to get a mortgage sooner than you think and comparing lenders enables you to find the best loan terms.
"B3-3.1-01, General Income Information." Selling Guide: Fannie Mae Single Family. Fannie Mae, August 7 2019. Web.