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Employment History Requirement for a Mortgage
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Employment History Requirement for a Mortgage

Michael Jensen, Mortgage and Finance Guru
, Mortgage and Finance Guru

Borrowers are typically required to be employed for a certain period of time before they can qualify for a mortgage.  The employment history requirement for a mortgage is generally the same across all lenders and loan programs, although there are some variations to the guidelines, as outlined below.  The employment history guidelines also vary depending on the type of work, with self-employed and part-time or seasonal work typically requiring longer work histories and allowing less flexibility or exceptions. In general, borrowers are required to have a two year employment history to qualify for a mortgage although there are certainly cases when borrowers with shorter work histories, such as one-to-two years, are able to qualify.

Please note that the employment history requirement for a mortgage applies to an applicant's job history and not employment with a specific company. For example, borrowers that have changed jobs several times over the prior two years are not at a disadvantage as long as they have not experienced an employment gap of longer than a month. Moreover, borrowers who have changed employers but who continue to advance in their career field and earn a steady or improving income are better positioned to qualify for a mortgage.  Lenders are less concerned with where you work or your job title and more focused on the stability of your income, your prospects for continued employment and ultimately your ability to continue to earn enough money from your job to repay your mortgage.

An important point about the employment history requirement for a mortgage is that military service and formal education such as college or vocation school are usually considered employment when you apply for a mortgage.  For example, a borrower who attended school full-time or served in the military for at least year is usually only required to have a one year work history before they can qualify for a mortgage.     

The employment history requirement is also impacted by the type of income an applicant earns.  For example, most programs require that borrowers have a two year history of earning bonus, commission and overtime income for lenders to include that income when you apply for a mortgage.  Additionally, lenders typically use the two year average of bonus, commission and overtime income, as reported on your tax returns, when calculating your income for a mortgage.  It is uncommon for lenders to consider these types of variable income when you apply for a mortgage with less than a two year history unless part of your salary was shifted to bonus or commission and your income remains relatively constant.     

Lenders verify your employment when you initially apply for the mortgage, typically by having your employer fill-out an industry standard form.  Lenders also verify your employment within ten days of your scheduled mortgage closing date -- and sometimes the day prior to closing -- to confirm that you are still employed at your current job.  This pre-closing employment verification may be done verbally or in writing via email or other means.

We should also highlight that if your job has an initial probationary or trial period you are usually required to wait until this period expires and your job becomes permanent before you can qualify for a mortgage.

The table below outlines the employment history requirements for a conventional mortgage as well as for multiple government-backed mortgage programs.  The table shows how the requirements are different depending on the type of employment -- regular versus self-employed -- type of compensation -- bonus, commission and overtime -- and if the job is part-time or seasonal.  Review the table to understand how lenders view your job and income when you apply for a mortgage.

Employment History Requirements for a Mortgage
Mortgage Program
    Regular Employment Work History Requirement
    Self Employed Borrowers Work History Requirement
    Part-Time Job / Seasonal Work History Requirement
    Bonus, Commission and Overtime Income Work History Requirement
  • Two year employment history is standard but shorter employment histories may be permitted for applicants with stable jobs and incomes or other positive factors
  • Explainable employment gaps of six months or more are also permitted as long as the applicant has been back to work for at least six months and has a two year employment history prior to the work gap
  • Self-employed borrowers are typically required to demonstrate a two year job history
  • A self-employed job history of between one and two years is permitted if the applicant was previously employed in a similar field and earns a similar or greater income as evidenced by the borrower's tax returns
  • Self-employed applicants are also required to provide business tax returns for two years unless the business is at least five years old
  • A continuous two year history of part-time employment is typically required although part-time work history of one-to-two years may be permitted for stronger applicants
  • A two year history of seasonal work in the same job or line of work is required
  • Lenders are also required to verify with the applicant's employer that the applicant will be rehired for the next employment season
  • Borrowers with seasonal employment are permitted to use unemployment compensation as income as long as the compensation is due to regular, seasonal employment breaks
  • A two year employment history is recommended for bonus, commission or overtime income to be considered but guidelines permit an income history of one-to-two years for borrowers with strong employment, financial and credit profiles
  • The FHA Program does not technically have an minimum employment history requirement but lenders are required to verify applicants' employment history for the prior two years
  • Applicants are required to explain any employment gaps of at least one month
  • Explainable employment gaps of six months or more are also permitted
  • Self-employed borrowers are typically required to demonstrate a two year job history
  • A self-employed job history of between one and two years is permitted if the applicant was previously employed in a similar line of work for at least two years
  • A combination of one year of employment in a similar field plus one year of education or training in that field is also permitted for self-employed borrowers
  • An uninterrupted two year history of part-time employment is typically required although part-time work history of less than two years may be considered as long as the lender determines that the work is likely to continue
  • Income from seasonal employment is also permitted as long as the applicant has a two year work history and expects to be rehired for future seasons
  • A two year employment history is required for bonus, commission or overtime income to be considered 
  • An employment history of less than two years is allowed if the lender justifies and documents the reason for including the income
  • Lenders are also required to explain any significant declines in bonus, commission or overtime income
  • Significant fluctuations in bonus, commission or overtime income may require the lender to use an average period of longer than two years to calculate the applicant's income
  • The USDA Home Loan Program does not technically have an minimum employment history requirement but lenders are required to verify applicants' employment history for the prior two years and confirm that the applicant's income is stable
  • Applicants are required to explain any employment gaps of at least one month
  • Explainable employment gaps of six months or more are also permitted as long as the applicant can document the reason for the gap, has been back to work for at least six months and has a two year employment history prior to the work gap 
  • Self-employed borrowers are typically required to demonstrate a two year job history as documented by the applicant's tax returns
  • A self-employed job history of between one and two years is permitted if the applicant was previously employed in a similar line of work for at least two years or one year of work plus one year of formal education or training
  • The lender is required to confirm that the self-employment income is expected to continue for at least three years
  • A self-employed history of less than one year is not permitted
  • An uninterrupted two year history in the same position is typically required for part-time employment although a part-time work history of less than two years may be considered if the lender verifies with the employer that the work is likely to continue at the same compensation level
  • Income from seasonal employment is permitted as long as the applicant has a two year work history and expects to be rehired for future seasons
  • The lender is required to determine that part-time and seasonal income is expected to continue for the next three years
  • Income from part-time or seasonal work must be reported on the borrower's tax returns to be considered by a lender
  • A consecutive two year payment history and determination by the lender that the income is expected to continue for the next three years is required for bonus, commission or overtime income to be considered 
  • Bonus, commission or overtime income earned for less than a year is not permitted without significant compensating factors such as a change in the applicant's compensation structure
  • Lenders are required to explain any significant declines in bonus, commission or overtime income
  • Significant variations in bonus, commission or overtime income may require the lender to use an average period of more than two years to calculate the applicant's income
  • The VA Program requires lenders to verify an applicant's employment history for the prior two years although there is no minimum employment history guideline
  • Applicants with an employment history of less than a year may be considered if the lender determines and documents that the applicant has a high probability of continuing his or her job
  • The applicant's employment history is evaluated on a case-by-case basis
  • Active military personal who are within 12 months of their release date are required to reenlist or provide verification of a job offer after their release from the military
  • Self-employed borrowers are typically required to demonstrate a two year job history unless the applicant was previously employed in a similar line of work or received specialized training in that field
  • A self-employed history of less than one year is highly uncommon
  • A continuous and verified two year history of part-time employment is generally required
  • The applicant's income from part-time work should be steady and predictable and the lender is required to determine that the work will continue in the future
  • The lender is also required to confirm that applicants can handle the part-time job along with the demands of their primary job
  • A two year work history is required for bonus, commission and overtime income to be considered by the lender unless the borrower has extensive experience or training in their field of work
  • The lender must determine that the income is predictable and likely to continue in the future
  • Bonus, commission and overtime income with less than a two year work history is rarely permitted and requires extensive documentation by the lender
  • The HUD Section 184 Program required lenders to verify applicants' employment history for the prior two full years
  • Applicants are required to explain any employment gaps of at least one month
  • Explainable employment gaps of six months or more are also permitted as long as the applicant has been back employed for at least six months and has a two year employment history prior to the work absence  
  • Lenders are required to confirm that the applicant's employment and income are expected to continue for at least three years
  • Self-employed borrowers are typically required to demonstrate a two year job history as evidenced by personal and business tax returns as well as a profit and loss (P&L) statement and balance sheet for the business
  • A self-employed job history between one and two years is allowed if the applicant was previously employed in a similar line of work for at least two years or a combination of one year of employment in a similar field plus one year of training in that line of work
  • A self-employed history of less than one year is not permitted
  • A two year work history is required for the lender to consider part-time or seasonal employment although income from part-time work with a one-to-two year job history may be considered under certain circumstances
  • For seasonal work, lenders are required to verify that the employer intends to hire the applicant in future seasons
  • Bonus, commission or overtime income may be considered if the applicant has received that type of income for the prior two years and the income is expected to continue
  • Bonus, commission or overtime income earned for less than a two year period may be permitted as long as the lender documents the reason for using the income
  • If bonus, commission or overtime income declines over a two year period the lender is required to use the lower annual income figure and not the average income for the two years

Although the table presents standard employment history requirements, guidelines can vary under certain circumstances so we recommend that borrowers, especially those with unique job histories, contact several lenders to understand how the guidelines apply to them.  Reach out to multiple lenders in the table below to learn more about their job history requirements and determine if you qualify for a mortgage.  For example, some lenders offer loan programs that are designed especially for self-employed applicants.  Comparing lenders is the best way to find the mortgage and program that are right for you.      

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Data provided by Brown Bag Marketing, Inc. Payments do not include amounts for taxes and insurance premiums. Read through our lender table disclaimer for more on rates and product details.

Sources

"B3-3.1-01, General Income Information."  Selling Guide: Fannie Mae Single Family.  Fannie Mae, August 7 2019.  Web.

"II.A.4.c. Income Requirements (TOTAL)."  FHA Single Family Housing Policy Handbook 4000.1.   Federal Housing Administration, January 2 2020.  Web.

"Chapter 4.2. Income – Required Documentation and Analysis."  Lenders Handbook - VA Pamphlet 26-7.  U.S. Department of Veterans Affairs, 2020.  Web.

"Chapter 9.3.E. Verification Requirements."  Single Family Housing Guaranteed Loan Program Technical Handbook.  U.S. Department of Agriculture, 2020.  Web.

"5. Determining Income."  Section 184 Indian Loan Guarantee Program Processing Guidelines.  U.S. Department of Housing and Urban Development, 2019.  Web.

About the author
Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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