A common misconception is that you need to be on your job for two years to qualify for a mortgage. This myth exists for two reasons. 1) History of income – lenders typically need a two-year history of income (could be different jobs) and will collect documents from the previous two years to verify income stability. 2) There are certain types of income that require a 2-year history to be considered stable/usable. Typically, these sources of income are variable such as bonus, commission, or part time work.
What conventional guidelines actually require is evidence of stable income. Depending on your type of income this can vary dramatically.
Just out of School – if you have recently completed university, a trade school, or a professional school and accepted a salaried or guaranteed min hour position in your field of study you will be able to use your school history in lieu of work history. This means you can qualify without a full 2-year work history on your current job or other jobs. It also means you could qualify based on a non-contingent employment offer or contract that commences no more than 90 days after close. Theoretically you can buy your first home, with no work history, 90 days before you start your first job. If you close before you start your job, you will need financial reserves to cover the mortgage payment from the date of close to your start date.
Employment Gaps -If you have prior work experience but have recently been unemployed due to raising children, medical reasons, or other personal circumstances, you can use your prior work history to meet lender work history requirements. In such cases, underwriters will review the reason for your employment gap and the type of income you are currently earning. Salaried positions or jobs with guaranteed minimum hours are usually accepted right away, while self-employment or variable income may require minimum employment periods.
New Job – if you recently accepted a new salaried non-contingent job offer you can use that offer as qualifying income for a mortgage. You can close as early as 90 days before your employment start date as long as you have some reserve funds (or current job income) to cover the time period between close and when you start your new job. If your new job is variable income based – commission, self-employed, independent contracting, etc. your income will unfortunately be looked at as unstable in most circumstances.
While Fannie Mae/Freddie Mac, HUD, VA, and USDA all have their own standard guidelines some lenders will add ‘overlays’ to these guidelines that can make qualification more challenging. There are additional portfolio loans and ‘non-qm’ loans that can have more flexible guidelines for specific situations. Don’t hesitate to contact me if you have questions or need a second opinion on qualifying for a mortgage!