One requirement for a mortgage is an employment history (or income that we can verify). So what happens if you want to buy a home and have a new job? Maybe you are a first time homebuyer and just starting your career. Maybe you were laid-off and just started back to work. Maybe you were offered a new job and switched employers recently. How does this affect your ability to get a mortgage?
Lenders want to see a two-year employment history, but that doesn’t mean you need to be at the same employer for two years. Here are some things we use for employment history.
– You just started your career, so what now? If you are paid hourly or salary and just started, but also just finished school (maybe a recent college graduate?), we can use your school transcripts as part of your employment history.
– You just accepted a new position but have not started yet. We can usually use the offer letter showing your new position.
– You were self employed or a contract worker and just started a new position that is salaried. We can use the self employment history as long as we can show that you were working in the past two years.
If your income is salaried or hourly pay, it’s easier to move to a new job. However, if there are frequent job changes (more than three in a year), you may need six months on the current job to get a mortgage. If you have large gaps of employment, we will need an explanation and that will determine how underwriting looks at your past employment. Again, you may need six months on your current job.
For those that get commission income, you will need a minimum of one-year of commission employment. You may need two years depending on the program and your past history. If you get a base salary plus commission, you may only be able to use the base salary until you have 1-2 years of commission income.
Are you self-employed? If so, you will need two years of tax returns to be able to use your income. Underwriters will average your income over the past two years. Remember we will use your net income (gross income minus expenses), but there are some expenses we can add back. Depreciation and mileage can usually be added back to your net income.
Do you work two part-time jobs? We need a two year history of working two jobs to use both incomes. We will average that income over the past two years.
For those that get retirement income or disability income, we just need to show that it will continue for at least three years. The same thing with child support, we can use the income but need to show it will continue.
Bonus and overtime income can be used, but again we need a two year history of receiving that income. We will also usually send out an employment verification and we will want the employer to state that the bonus and/or overtime income will continue.
When you talk to your loan officer about your income and employment history, make sure you ask questions. Also make sure you are giving your loan officer accurate information. We do have to document that income so it’s easier if we know the entire story in the beginning!