One common topic many borrowers have questions about when they want to apply for FHA loans involves employment history. How long do you have to be on the job with your current employer before you can qualify for an FHA mortgage loan?
Believe it or not, FHA loan rules state that there is no minimum length of time you have to be with your current employers in order to be considered for a loan. According to HUD 4155.1 Chapter Four:
“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 borrowers employment for the most recent two full years, and the borrower must
–explain any gaps in employment that span one or more months, and
–indicate if he/she was in school or the military during the most recent two full years, providing evidence supporting this claim, such as college transcripts, or discharge papers.
Allowances can be made for seasonal employment, typical for the building trades and agriculture, if documented by the lender.”
As you can see much of the decisions made about the borrower’s creditworthiness in this area is made at the lender’s discretion. Furthermore, frequent job changes may not be the liability some might assume it is, if those job changes result in a direct benefit to the applicant. From Chapter Four:
“When analyzing the probability of continued employment, the lender must examine the borrowers past employment record, qualifications for the position, previous training and education, and the employers confirmation of continued employment.”
Chapter Four adds that the lender can “favorably consider a borrower for a mortgage if he/she changes jobs frequently within the same line of work, but continues to advance in income or benefits. In this analysis, income stability takes precedence over job stability.”
The sustainable income question is one of the most important–borrowers who can show that their income is stable, reliable, and likely to continue have a much better chance at loan approval.
Do you have questions about FHA home loans? Ask us in the comments section.