August 13, 2014
We get many questions on a regular basis about the FHA loan program’s rules for employment. Is there a minimum required employment time a borrower must have in order to qualify for an FHA mortgage?
The FHA loan rules for employment are found in HUD 4155.1. In Chapter One, Section B, we learn the following:
“The lender is required to verify the applicant’s employment history for the previous two years. However, direct verification is not required if all of the following conditions are met:
• the current employer confirms a two-year employment history (this may include a pay stub indicating a hiring date)
• the lender only uses base pay (no overtime or bonus pay) to qualify the borrower and
• the borrower signs Form IRS 4506 or Form IRS 8821 for the previous two tax years.”
Does this portion of the FHA loan rules require the FHA loan applicant to have worked for the same employer for those two years? Not according to Chapter One, Section B, which says the lender will need written or electronic documentation to verify the borrower’s work status between multiple employers:
“If the borrower was not employed with the same employer for the previous two years, and/or the above conditions cannot be met, the lender must verify the most recent two years of employment history by obtaining
• copies of W-2s
• written VOEs, or
• electronic verification acceptable to FHA.
No explanation is required for gaps in employment of six months or less during the most recent two years.”
Self employed borrowers have additional requirements for documentation and verification of their employment record:
“The lender must obtain
• federal income tax returns for the most recent two years, both individual and business, including all applicable schedules, for self-employed borrowers, and
• individual federal tax returns for commissioned individuals.”
Self employed borrowers should discuss their loan application with the loan officer since there may be additional requirements based on the financial institution and other provisions of the FHA loan rules.
Again, FHA loan rules do not require the borrower to have two years with the same employer as a minimum for loan approval, but they do require the lender to verify that the borrower has been employed in some way for the 24 months leading up to the loan.
Do you have questions about FHA home loans? Ask us in the comments section. You can get information about applying or getting pre-approved for an FHA loan at FHA.com, a private company and not a government website.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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