September 21, 2019

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FHA Loan Approval Rules: Work History

FHA Home Loan Approval Rules: Work History

Whether you seek an FHA One Time Close construction loan or want to buy an existing-construction home, the FHA guidelines for loan approval require your lender to verify your employment and income history.

How much time will the lender require you to be on the job in order to get your mortgage loan approved?

That standard will vary from lender to lender, so you will need to discuss work history requirements with your loan officer. However, at a minimum, FHA loan rules require the lender to verify two years of work history.

That work history does not have to be with the same company.

FHA Loan Rules For Income Verification

Along with your recent work history, the lender is also required to verify the income you report to the lender and on your tax paperwork. If you have a limited work history, but show progression in income and job responsibilities may find the lender has an easier time justifying loan approval even with a shorter work history.

Naturally, lender standards will apply here and other financial qualifications may be required.

Employment history is a more crucial issue in cases where the FHA loan applicant transitions from being an employee to working as a self-employed contractor, freelancer, etc. Self-employed borrowers should know what HUD 4000.1 instructs the lender:

“If the Borrower has been self-employed between one and two years, the Mortgagee may only consider the income as Effective Income if the Borrower was previously employed in the same line of work in which the Borrower is self- employed or in a related occupation for at least two years.”

Frequent Changes In Employment

If an FHA loan applicant “…has changed employers more than three times in the previous 12- month period, or has changed lines of work, the Mortgagee must take additional steps to verify and document the stability of the Borrower’s Employment Income” according to HUD 4000.1.

Your lender may need to perform “additional analysis” when reviewing the types of jobs which “regularly require a Borrower to work for various employers (such as Temp Companies or Union Trades)”.

You may need to provide your loan officer with certain records or transcripts of training or achieving formal qualifications for a new job “or employment documentation evidencing continual increases in income and/or benefits” according to HUD 4000.1.

Bruce Reichstein - Staff Writer

By Bruce Reichstein

April 26, 2018

Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.

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