Can I buy a house without a 2-year job history? (Podcast)

Can I buy a house without a 2-year job history? (Podcast)
Written by Publishing Team

Bypassing the two-year rule

Having a stable job for two years is one of the main requirements for getting a home purchase loan.

But what if you just started a new job, or recently changed profession? This does not necessarily mean that you are not eligible to buy a home.

In fact, according to mortgage consultant Evan Semental, employment history is just one piece of the puzzle. If you can prove that you are a solid borrower — and not a risky bet for a lender — there are ways to get around a two-year career history. Here’s how.

Check your home purchase eligibility (January 10, 2022)

Listen to Evan on the podcast of Mortgage Reports!

Do you need a career history to buy a home?

Technically, yes, a two-year business history is required to purchase a home. This can make mortgage approval difficult for first-time homebuyers, or borrowers who have recently changed jobs.

The good news? There are several ways around the two-year rule, Simental said on a recent episode of The Mortgage Reports Podcast.

“When a lender looks at your loan profile, they want to make sure you can repay the loan,” he explained. “There are three main things they look at: your credit, your income — which includes your business and your assets — and what you have for a down payment.”

In other words, lenders look at the whole picture of your mortgage application. So it’s possible to offset a shorter employment history by being strong in other areas, such as your credit score or your assets.

The exact flexibility will depend on your specific situation, including your career path, your loan program, and the lender you choose. Let’s dive into the details now.

Who can buy a house without A two-year career history?

“If you have great credit, can spend a lot of money or have money in reserves, but don’t have a two-year employment history, lenders can make an exception,” Semental said.

The key to these exceptions is the presence of what lenders call “compensation factors” — or items that offset (and then some) a negative mark on your loan application.

Compensating factors include things like:

  • Very big down payment
  • Great credit score
  • Low Debt-to-Income Ratio (DTI)
  • Too much cash in savings or assets
  • A new mortgage payment that is the same or less than what you are currently paying for housing

If you have one or more of these factors, Simmental said, lenders “will see you as a responsible, non-risk borrower” and will be more likely to approve your mortgage.

The most important thing is to be able to demonstrate that you can afford the monthly payments for your new loan.

Your bank statements, payment slips, tax returns, or a strong offer letter from a new employer can help you with this — even if you don’t have a two-year work history.

Check your home purchase eligibility (January 10, 2022)

Mortgage approval is all about consistency

According to Simental, a “two-year” employment history does not necessarily mean two years in the same job, or even two years of employment at all.

Instead, lenders want to see consistency – that you have had some type of income for the past two years and will continue to do so after your loan is closed.

“If you’ve had multiple jobs in the past two years, but have worked for two years in the same line of business or in a somewhat related field, we still count that as two years of fixed income,” Semental said. “You don’t have to be in the same job for two years. It just has to be two years of consistent work in the same or similar field.”

You don’t have to be in the same job for two years. You just need two years of consistent work in the same or similar field.

In some cases, education can be considered work as well. This is especially true for high-income professionals such as doctors and lawyers. Some new professionals may be approved based on the strength of the job offer alone.

Even unemployment income, if earned on a regular basis, can sometimes count toward a two-year employment history.

“Let’s say that for the past two years, you worked for six months, got unemployment for two months, worked again for six months, and did it on a consistent basis for two years,” Semental said. “We can then use that unemployment money as income, because you’ve been consistently unemployed for two years.”

Simental said this approach is common with seasonal and contract workers who may not have a full-time job or a steady monthly income.

Flexibility varies by lending program and lender

The exact flexibility you will have will depend on your mortgage loan program and the lender you choose.

The rules for hiring by loan type are as follows:

  • With FHA loans and conventional loansYou will need two years from your employment date and at least six months in your current job
  • VA Loans Require borrowers to have at least two years of work, study or military service
  • USDA Loans Ask about your two-year work history (although there is no minimum time in your current position)

Guidelines also vary by lender, as each company has its own requirements and risk limit. This is why it’s important to shop for a mortgage lender – especially if you’re concerned about your disqualification.

“There are a lot of lenders that can and will work with you,” Semental said. “It is up to you to do your homework and your research and find these lenders.”

Bottom line? Don’t give up if you are not approved immediately

Finally, Simental said, if you are rejected, it does not mean that you cannot get a loan from somewhere else. So keep trying.

“Just because one lender tells you no doesn’t mean another lender will tell you no as well,” he said on the podcast. “It all depends on the bank in its guidelines and how flexible it is with those.”

So if you think you qualify for a mortgage—whether you’ve worked in the same field for two years, or have a similar educational and work history—apply with a few different mortgage lenders.

Not only will this help you get approved, but it will also help you find the lowest interest rate possible and save money on your new home.

Show me today’s rates (January 10, 2022)

The information on the Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed here are those of the author and do not reflect the policy or position of Full Beaker, its officers, parents, or affiliates.

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