Many borrowers believe the employment gaps in their work history is an automatic loan dis-qualifier, but that’s actually not true. The FHA allows gaps in employment as long as you have a good history of length with employment. Most people need to be able to show 2 years of employment to be qualified for an FHA loan.
Explaining Gaps in Employment
The first thing your lender is going to ask after reviewing your employment history is to explain your gaps in employment. Did you stop working to have a baby or raise a family? Take time off to go back to school? Fired or asked to leave? Trying to getting a better more paying job? These are just a few examples of why there may be gaps in employment. Most lenders will accept these types of reasoning, especially if it involves raising a family or having a new baby. However, if you were fired you may have a harder time qualifying, ask your lenders for details regarding your specific reasoning for employment gaps. The more your reasoning reflects you were trying to better yourself financially, you will have an easier time getting approved.
Irrelevant Employment Gaps
Some people may have gaps in their employment depending on the type of industry they’re in. Industries like; construction, lawn care or agriculture may have gaps due to off-season inactivity. For borrowers in these types of career fields, it’s common to have gaps in employment and doesn’t affect your qualifying chances. Keep in mind, you will still need to provide the lender with an income average for a years’ worth in order to prove you can still afford the loan regardless of off-season work schedules.
Another thing that lenders will want to know is, the probability of you continuing your employment. This is very extremely important for borrowers with a lot of gaps in their employment. Lenders need to see your past employment history, as well as the likelihood of you staying employed. If you have a lot of gaps in your employment, that shows your lender inconstancy and shows you don’t have a good history of staying employed for a long time. However, if you can show your lender that you are/were working to better yourself, you are more likely to be approved.
Gaps in Employment to Further Education
If you have gaps in your employment that are from leaving work to further your education this could actually benefit you rather than hurt your chances of approval. If you can show that you were going to school in order to work towards a career that offers higher payment, the gap in your employment for that reason could be irrelevant in the qualifying process. It will also help your chances if the employment you received after you left for school purposes pays a higher dollar amount than the previous job, which will also better your chances for approval.
Rule of thumb
The FHA is going to want to see you have a strong work history, but even more so they want to see stability and length in your employment. As long as you have been employed for more than 6 months continuously, you will be qualified. Keep in mind lenders will have their own qualifying guidelines on top of those set by the FHA. So even though the FHA requires you be employed for at least 6 months, your lender, depending on which one you choose, may require you to have been employed for at least 2 years continuously. This will vary by lender, but some lenders are willing to work with borrowers who have gaps in their employment.
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