November 1, 2016
A reader asks, “I am planning to apply for a home loan, in the next couple months. I am a recent college graduate that has been employed at my current job since May 2016 (just about 6 months). I am planning to buy a house for no more than $110,000, with a $8000 down payment. Will my lack of experience stop me from getting a home loan?”
It’s true that in addition to FICO scores and credit history, there are also FHA guidelines for employment and income. In general, FHA loan rules require the lender to either verify two years of employment history or provide alternate documentation of either school enrollment or military service.
According to HUD 4000.1, “The Mortgagee must obtain the most recent pay stub and one of the following to verify current employment:
-a written Verification of Employment (VOE) covering two years; or
-an electronic verification acceptable to FHA.”
Additionally, “If the applicant has not been employed with the same employer for the previous two years…then the Mortgagee must obtain one or a combination of the following for the most recent two years to verify the applicants employment history:
-W-2(s)
-VOE(s)
-electronic verification acceptable to FHA
-evidence supporting enrollment in school or the military during the most recent two full years”.
It is very important to know that individual lender standards may apply above and beyond what’s mentioned here, so it’s crucial to have a conversation with a loan officer to see what may be possible at that financial institution.
FHA requirements aren’t the only guidelines that may have to be followed in cases like these. State law, lender standards, and other factors may all play a part in the final decision by the lender.
Borrowers may find that overall employment history that does not reach a full year is a harder sell to the lender. This is due to the requirement that FHA lenders insure that a borrower’s employment is stable, reliable, and likely to continue.
Depending on the nature of the borrower’s employment, skills and training, and other factors, a lender may be able to justify the loan even with a shorter amount of time on the job (with respect to overall employment history, not necessarily how long the borrower has been with a specific employer) than usual.
Speak with a loan officer to determine what may apply in your specific circumstances.
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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