Employment Requirements for Home Loan Approval
As you prepare to purchase a home and apply for a mortgage loan, it’s important to understand how your employment status and employment history can affect your mortgage loan eligibility. In this article, we break down the necessary employment requirements for home loan approval.
What Are The Employment Requirements to Qualify for a Home Loan?
To qualify for a mortgage loan, you will need to be employed or be retired and have retirement income. You also need consistent work history. A mortgage underwriter will want to see at least two years’ worth of work history for you to qualify for a home loan.
What Are The Employment History Requirements?
As mentioned earlier, you will need at least 2 years’ worth of work history, but lenders do not just want to see that you have worked for two years or more. They also want to see that you have consistently worked in the same type of job.
They also want to see a steady increase in income. If your income is stagnant or decreasing, this creates more risk for your lender.
How Long Do I Need to Have the Same Job?
You need two years’ worth of work history, but this does not mean you need to have held the exact same job for two years. Lenders don’t mind if you have changed jobs as long as those jobs are related, in the same field or similar fields, and your income has steadily increased over time.
What If I Recently Got a New Job?
If you recently changed jobs and started a new job, this should not affect your eligibility as long as the rest of the required employment history is there. If you are newly “self-employed,” this may affect your loan eligibility since self-employment does not guarantee income. It also is not a guarantee that your income will increase from what it previously was, which lenders want to see.
Do Employment Gaps Make Me Ineligible For a Home Loan?
Typically, employment gaps will not hurt your eligibility as long as your employment gaps can be reasonably explained, do not exceed an aggregate of six months, and you still have two years’ worth of employment history to show.
For example, many people were suddenly unemployed in 2020 due to the pandemic and the economic recession. This is a reasonable explanation for unemployment.
Does College Enrollment Count as Employment?
You can count your college enrollment, both undergraduate and graduate enrollment, as employment, if you have graduated. If you were enrolled in classes and did not graduate, you cannot count your enrollment as time employed. If you did graduate and want to count your enrollment towards employment, you will need to submit a copy of your official transcripts and degree to your mortgage lender.
At the end of the day, it is your mortgage lender’s job to ensure that you can afford your home loan. If you have special circumstances, you can always appeal to your mortgage lender to make an exception for you and write a letter of explanation concerning any employment gaps or other parts of your employment history that you believe may hurt your chances of getting approved for a mortgage loan.
How Does a Lender Verify My Employment Status and History?
A mortgage lender will verify your employment status through your pay stubs and W-2s. You will need to provide at least 30 days’ worth of pay stubs to your mortgage lender and the last two years’ worth of W-2s. They will also verify your employment status through a Verification of Employment (VOE) form that they send to your employer to have them sign and return to verify that you are in fact currently employed. This VOE form includes your employer’s contact information, which your lender will use to verify your employment status on the day of closing.
Can I Change Jobs After Getting Pre-Approved for a Home Loan?
You should not quit your job after getting pre-approved for a home loan, because if you are not employed on the day of closing, your loan application will be rejected and you will not close on your home loan. However, you can change jobs after getting pre-approved for a loan as long as you submit all the necessary documentation verifying your employment and income status at your new job.
Contact a Loan Specialist
Are you ready to get pre-approved? Do you have more questions? The loan specialists at VeteransLoans.com can determine your loan eligibility and get you pre-approved in a matter of minutes! VeteransLoans.com offers VA, FHA, and conventional mortgage loan products. Call 1 (888) 232-1428 to speak with a loan officer today!