Fortunately, the answer is ‘no.’ There are ways to get mortgage approval even without two years of employment history. We help you discover the ways below.
Employment History Means More Than Your Job
What lenders really want to know when they look at your employment history is the likelihood of succeeding at your job. A 2-year history gives lenders some consistency and reliability. If you’ve lasted at least two years at the job, chances are that you have what it takes to succeed. That doesn’t mean you won’t be unemployed in the future or that you’ll stay at that job, but it shows lenders that you have longevity and a good work ethic.
A 2-year history isn’t the only way to ensure that you can succeed at your job, though. Again, lenders want to know your chances of succeeding at the job. You can prove this in several ways:
- A degree related to the industry you work – Recently graduating from college and immediately working in the industry or getting a strong job offer in the industry can be enough. Lenders may want you to have some time at the job, say six months to a year, but you generally don’t have to wait two years.
- Job training – You don’t necessarily have to graduate from college. If you can prove you had other effective training that provided you with the skills and knowledge to succeed, it may help you get a mortgage without a 2-year history.
- Lateral job moves – If you changed jobs recently, but it was within the same industry/job position, your previous work history may still count. For example, a teacher moving schools or even changing grades still counts. But, a teacher turned accountant may make a lender hesitate, requiring proof of your training and/or education to succeed in the new position. The lender may also require a longer job history in the new industry.
A 2-year job history doesn’t mean two years at any job. Changing jobs within different industries is just as erratic as an unemployed person. Lenders look at your individual situation and add the pieces together. Do you have what it takes to succeed or are you a high risk? That’s what lenders consider before making a decision.
Loan Program Requirements
As is the case with all factors, each loan program has its own requirements:
- Conventional loans – Generally, conventional lenders want a two-year history. They often allow education or training to supersede that requirement though. The more data and explanations you can provide for your lack of a 2-year history, the better your chances of approval.
- FHA loans – The FHA looks at the big picture, rather than your current job. You need a 2-year history of work, school, or training. The only time the FHA gets uneasy is if you have gaps. You must provide a written explanation of the gaps. It helps if you had the gap in order to better yourself (improve your skills, go back to school, etc.) Your letter should show improvement in some way in order for the FHA lender to accept the lack of a good history.
- USDA loans – The USDA also wants a 2-year history of work or school. It doesn’t have to be at the same job and you can have a gap. If you do have a gap, though, it must be for school or military service – that’s all the USDA allows.
- VA loans – The VA gets strict when you have less than a 12-month history of employment. It doesn’t have to be a straight year at the same job, but it should be a consistent history of working and/or military service. If you don’t have that 12-month history, the VA lender may need to inquire with your current employer about your chances of continued employment.
Steady Income is What Matters
In all reality, a steady income is what matters. Lenders need to know that you can repay your debt in a timely manner. Showing a steady work history shows lenders that you are responsible and make a steady income. If you hop from job to job or have large gaps of unemployment, you don’t have a steady income and pose a higher risk.
You may find lenders willing to give you a loan even with larger gaps, but you will likely pay higher interest rates and fees. Pay close attention to the bottom line to make sure it makes sense for you. Most of the major loan programs have exceptions for all situations, including employment gaps.
Try your best to create a 2-year employment history that makes lenders see you as a good borrower. Any ‘issues’ that make you high-risk can cause lenders to further evaluate your application and possibly charge you more for the loan.