November 26, 2013
One common misconception about FHA home loans is that the FHA requires a minimum time on the job in order for you to qualify for a FHA guaranteed mortgage loan. Specifically, some think that the FHA requires you to work for the same employer for at least two years, or some variation of this idea.
This confusion might come from a misreading of the rules of FHA loans, which state that the lender is required to verify an FHA loan applicant’s work history for the past two years. That does not mean, “insure the applicant has worked for the same company for at least two years.”
What does it mean? It simply means the lender must document the borrower’s work history over the last 24 months. In some cases, it may not be necessary to contact the employer directly provided certain conditions are met.
FHA loan rules say, “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 cases where an FHA loan applicant has not been employed at the same company for the last two years, FHA loan rules say the lender is required to “verify the most recent two years of employment history by obtaining
• copies of W-2s
• written VOEs, or
• electronic verification acceptable to FHA.”
Furthermore, the FHA does NOT require written explanations for “gaps in employment of six months or less during the most recent two years”, but gaps longer than six months may require said explanation.
These are FHA requirements, your lender may have stricter requirements for employment verification including written explanations for employment gaps–talk to your loan officer if you have concerns about these issues and how to best address them.
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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