Many people mistakenly think that a gap in their employment automatically disqualifies them for an FHA loan or any loan for that matter. The good news is that this is not the case – even FHA loans allow a gap in employment as long as the factors all seem to fall into place.
Why are there Gaps?
The first thing to address is the reason for the gaps in employment. Did you stop working to raise a family? Were you fired? Or were you trying to better yourself and get a higher paying position? These are just a few of the scenarios that could occur. In the case of stopping employment in order to raise a family, most lenders and the FHA can accept that reasoning and use the current income to qualify you for the loan. If you were fired and had a large gap in your employment, you might have a harder time qualifying. In the event that you quit in order to go back to school to get more skills in order to get a higher paying job, you might also be able to get approved. The key is that your reason was to better yourself and your financial position in order to get approved.
Normal Gaps in Employment
Some industries have gaps in employment as a standard for the industry. This occurs in industries such as construction, lawn care, and agriculture. These industries obviously are not in operation during the colder months. For these employees, the gap in employment is expected and is able to be used for qualifying purposes. Keep in mind, however, that the lender will have to take a 12-month average of your income, even though you do not make money during certain months of the year. This is the only way to account for the months when you make a lower amount of income, ensuring that you will still be able to afford your mortgage payment despite your unemployment.
Probability of Continued Employment
Another thing that lenders want to know when you apply for an FHA loan is the probability of continued employment. This is of utmost concern if you have a gap in your employment, but it is important for every applicant. Lenders need to see not only your past employment history but also your likelihood of staying employed. This can be confirmed by your employer, with the qualifications you possess for the position, and any training you either have had in the past or are taking now. If you can show that you are working to better yourself, you are even more likely to stay employed, which works in your favor.
Gaps for Education
If you have any gaps in your employment that were started in order for you to be able to get further educated to further your career, this could work to your benefit with an FHA loan as well. If you can show that after your gap in employment you had a higher paid position, the gap in employment may be able to be overlooked.
In general, the FHA needs to see that you have been employed for at least the last six months continuously. Of course, this will vary by lender as some lenders will not talk to anyone that does not have a solid 2-year employment history while others are willing to look into the reason you had a gap in your employment recently. As long as you can produce a 2-year history prior to the gap in employment and you are able to explain large absences from the workforce, you should be able to find a lender willing to give you an FHA loan if all of your other qualifying factors fall into place.Click to See the Latest Mortgage Rates»