July 31, 2023
It’s never too early to start planning and saving for an FHA mortgage. But if you have just discharged a bankruptcy or have entered the job market for the first time recently, you may be subject to waiting periods until you have enough time past the bankruptcy or your first job to qualify.
There is a two-year rule for some FHA borrowers. These applicants must have at least two years in the job market or two years beyond the discharge date of certain bankruptcy types.
And then there are the borrowers who may have met the minimum time-in-the-job-market requirements but have recently changed the nature of their employment. How many years have you worked as your own boss or a contract employee?
If it’s under 24 months, you may need to wait a bit longer before applying for the loan. Why? One source notes, “In most instances, you’ll need two years of work history in the same field to be eligible for a home loan.
This requirement stems from guidelines set forth by Fannie Mae and Freddie Mac regarding conventional loan products.”
That source, Banks.com, notes that there are alternative lending options available, but borrowers who don’t have the ability to apply for “investor cash flow loans” or similar types of mortgage alternatives typically must wait out the two-year requirement.
There are some exceptions to these two-year requirements but they can be circumstantial. If you are in a training-intensive, highly specialized profession (legal work, medicine, or research) may give the lender a reason to approve the loan even without a full 24 months on the job.
No matter if you are subject to a waiting period or not, your mortgage application is likely to be more attractive to your loan officer if you have substantial cash reserves, investments, or assets in addition to your income.
Even applicants with plenty of time in the job market or current careers can improve their loan approval chances by bringing more cash to the table.
As mentioned above, there are some FHA borrowers with no choice but to wait out the two years required to be in the job market or after certain kinds of bankruptcy. The best thing while waiting out the time? Establish good credit and a dependable loan repayment history.
Use the waiting time to your advantage and you give the lender more reasons to say yes.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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