Most financial institutes have a requirement of two years’ work history while applying for a mortgage. However, it doesn’t mean you won’t be able to get a mortgage without two years’ work history. If you have an excellent credit score, can make a large down payment, and if your debt-to-income ratio is low then you can get a mortgage without two years’ work history.
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Do you Need a Job History to Buy a House?
Yes, you will need a job history to buy a house and you should have a minimum of two years of job history to qualify for the mortgage. So, this rule might be difficult for people who want to buy a home but recently they have changed their job. However, there is an exception to this rule; Ivan Simental a mortgage loan expert said –
“When a lender is looking at your loan profile, they want to make sure that you are able to repay the loan. There are three main things that they look at: your credit, your income — which includes your employment and your assets — and what you have for a down payment.”
So, from the above statement, it is clear that financial institutes check the full status of your mortgage application. Therefore, if you can make a large down payment and maintain a low debt-to-income ratio then you can make up for the short work history. However, you should keep in mind that the actual scenario depends on your career path, which company you have applied for, as well as the loan program that you have chosen.
Requirements to Get a Mortgage without Two Years Work History
If you don’t have two years’ work history then below are some requirements that you have to fulfill to qualify for a mortgage –
Proof of Employment: You have to provide proof of employment that shows you are an employee of a particular company. You have to provide a letter from your employer or other types of documentation that proves you are employed. If you are self-employed then you have to provide a business listing, a license, or a letter from your accountant that proves that you are really self-employed.
Income Requirement: You have to provide proof of your income that shows at least one month’s pay stubs. Moreover, you also have to submit proof of document for your gross income. If you are self-employed then you have to provide a bank statement that shows deposits on your account.
Down Payment Requirement: If you don’t have two years’ work history then you have to make a large down payment. If you have an excellent credit score then you have to make a minimum down payment of at least 15%.
Credit Score Requirement: If you don’t have two years’ work history, then you have to meet the minimum credit score requirement of at least 500. However, you should keep in mind that if your credit score is significantly low then you have to make a higher down payment. Moreover, it will also increase the interest rate.
Tax Returns and W2s: If you are a W2 wage earner then you will need to provide tax returns and W2s if they are available. On the other hand, if you are self-employed then you have to a P&L statement from an accountant.
Bank Statement: You have to provide the last two months’ bank statements if you are a W2 wage earner. It will prove that you have the down payment amount that is required by the lender. If you are self-employed then you have to provide up to a year’s worth of bank statements as proof of your ability to make the large down payment.
Other Documentation Requirement: You might be asked by the lender to provide documents of other assets which will help you get the approval. Other asset documents could be brokerage statements, real estate, retirement accounts, etc. You should provide these types of documents because they will strengthen your mortgage application.
Is it Possible to Qualify for a Mortgage with Unemployment Income?
Well, in most cases it is very difficult to qualify for a mortgage with unemployment income. If you have just been laid off and remain unemployed then you have to wait until you start a new job to qualify for a mortgage. However, there is an exception to this role for seasonal workers who have a regular history of receiving unemployment. For instance –
- If you are a contract worker, who works at least six months of the year and earns $90,000
- You receive unemployment income for the rest of the six months
- You have maintained this working schedule for at least two years
But, you should keep in mind that the above conditions apply only to seasonal workers who have excellent average yearly income combined with regular income and unemployment income.
Employment Requirements by Mortgage Loan Type
There are quite a few types of mortgages available and each type of mortgage has a different type of employment requirement. The below table will give you a clear idea of how long you have to be at a job to qualify for a mortgage –
|Mortgage Type||Job History Requirement|
|Conventional||At least two years of related job history. The current job should be at least six months old if there are any employment gaps.|
|FHA Loan||At least two years of related job history. The current job should be at least six months old if there are any employment gaps.|
|VAI Loan||Two years of relevant schooling or military service. If you are currently an active member then the duration should be more than 12 months from the release date.|
|USDA loan||If you are currently working then there is no minimum requirement. However, you have to provide documents for two years of work.|
FAQs about Can I Get a Mortgage without Two Years Work History
Can I Get a Mortgage With Gaps in Employment?
Yes, you can get a mortgage with gaps in your employment. However, you have to make sure that your income is sufficient to qualify for a mortgage. Moreover, if there is any gap in your employment then there might be some additional requirements from the lender –
- If you have an employment gap of six months or less then you can easily qualify for any kind of mortgage. However, you must currently be a full-time employee and you will be able to provide pay stubs covering 30 days of wages.
- If your unemployment gap is more than six months then you have to be employed in your new job for at least six months before you can ally for a mortgage.
Can I Get a Mortgage With Part-Time or Second Job Income?
Yes, you can get a mortgage with a part-time or second job income. However, you have to work your part-time job for at least two years to qualify for a mortgage. Moreover, you have to pay stubs with year-to-date information and two years of W-2 forms.
Can I Get a Mortgage With a Recent New Job?
Yes, you can get a mortgage with a recent new job. But in this case, you have to ensure that there is no unemployment gap. If there is any unemployment gap then the gap should not exceed six months. You have to receive the last paycheck within 30 days of closing the mortgage deal.
Can I get an FHA mortgage without two years’ work history?
No, you won’t be able to get an FHA mortgage without two years’ work history. The FHA mortgage requires at least two years of work history and there is no exception to this requirement.
How hourly income is calculated for a mortgage?
The below table will give you a clear idea of how hourly income is calculated for a mortgage –
|How Often Paid||How to Determine Monthly Income|
|Annually||Annual gross pay / 12 months|
|Monthly||Monthly gross payment amount|
|Twice Monthly||Twice monthly gross pay x 2 pay periods|
|Biweekly||Biweekly pay x 26 pay periods / 12 months|
|Weekly||Weekly pay x 52 pay periods / 12 months|
|Hourly||Hourly pay x average number of hours per week x 52 weeks / 12 months|
Last Updated on August 7, 2022 by Ana S. Sutterfield
Magalie D. is a Diploma holder in Public Administration & Management from McGill University of Canada. She shares management tips here in MGTBlog when she has nothing to do and gets some free time after working in a multinational company at Toronto.