When you want to apply for an FHA home loan, the lender will give you forms to complete that include requests for information on your past and current employment. Employment history is an important part of the FHA loan application review process and the lender is required to verify your employment by contacting your place of work.
But what do FHA loan rules specifically require? HUD 4155.1 has the guidelines for lenders. Chapter One Section B of HUD 4155.1 instructs your lender:
“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.”
Some FHA loan applicants might think this requires the borrower to have worked at the same company for the previous two years leading up to the application. Is this true? Not according to Chapter One, Section B:
“If the borrower was not employed with the same employer for the previous two years, and/or the above conditions can not 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.”
The FHA loan rules in this section also instruct the lender, “No explanation is required for gaps in employment of six months or less during the most recent two years.”
So while it’s important to know the contact information on your previous employer at application time, you should not worry about not having been on the job at your current place of work for less than two years in most cases.
Do you have questions about FHA home loans? Ask us in the comments section.