June 10, 2013
A reader asks, “Do I qualify for a loan? I have been at my present job for only a few months. I do have years of good credit. I pay my full balance on my credit cards every month. I never bought a house in my life.”
The FHA loan rules as stated in HUD 4155.1 have a list of requirements the lender must fulfil when processing an FHA loan application. Those requirements included employment verification; “The lender is required to verify the applicant’s employment history for the previous two years. However, direct verification is not required if all of the following conditions are met:
- the current employer confirms a two-year employment history (this may include a pay stub indicating a hiring date)
- the lender only uses base pay (no overtime or bonus pay) to qualify the borrower and
- the borrower signs Form IRS 4506 or Form IRS 8821 for the previous two tax years.”
In the case of this reader question, the FHA makes provisions for borrowers who have not been at their current job for two years or more.
“If the borrower was not employed with the same employer for the previous two years, and/or the above conditions cannot be met, the lender must verify the most recent two years of employment history by obtaining
• copies of W-2s
• written VOEs, or
• electronic verification acceptable to FHA.
No explanation is required for gaps in employment of six months or less during the most recent two years.”
The last sentence is an important one to remember for anyone who did have an employment gap of six months or longer in the last two years–you may be required to submit a written explanation about that gap as part of your loan application.
The bottom line for our reader question is this–you don’t have to work for your current employer for two years or more to get favorable consideration for an FHA mortgage loan, but you will need to show your employment history for the last two years or more, depending on the lender.
Do you have questions about FHA loans? Ask us in the comments section.
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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