Getting a Mortgage with a Short Employment History

In this guide, we will cover getting qualified and approved for a mortgage with a short employment history. Homebuyers, whether they are first-time homebuyers or seasoned buyers, do not need a full two-year employment history to get approved for a mortgage loan. Homebuyers can qualify and get approved for a mortgage with a short employment history.  To put it bluntly, let’s go over getting approved for a mortgage with a short employment history. John Strange, a senior loan officer at GCA Forums Mortgage Group and an associate contributing editor at Great Content Authority Forums, is an expert in qualifying borrowers for a mortgage with a short employment history. John says the following about getting a mortgage with a short employment history:

If you are a full-time student and never had a job, you can qualify for a mortgage with no prior work experience if you graduated from a two-year college, technical school, or four-year college or university and got a full-time job. The borrower needs to provide an employment offer letter guaranteeing a full-time job position with the likelihood of employment continuing for the next three years.

You can also qualify and get pre-approved for a mortgage with a short employment history if you have gaps in employment. With gaps of employment, this is how it works: If you get a new full-time job and have been unemployed or had a gap in employment for six or fewer months, then there is no waiting period on your new job. However, if you had a gap in employment or been unemployed longer than six months, you need to be on your new job for at least six months with the likelihood of continued employment for the next three years. If you go from a 1099 wage earner to a W2 wage earner, there is no seasoning on your new W2 job as long as you can provide an employment offer letter. If you go from a W2 wage earner job to a 1099 new job, then you need to stay on your 1099 new job for at least two years to qualify for a mortgage with a short employment history. If you go from part-time employment to full-time employment, there is no waiting period on your new job to qualify for a mortgage. However, if you go from a full-time job to a part-time job, then you need to have two years of seasoning on your new part-time job to qualify for a mortgage. In the following paragraphs, we will cover getting a mortgage with a short employment history.

Guide to Getting a Mortgage with a Short Employment History

Many home buyers stress whether their short employment history will disqualify them from obtaining a mortgage. Most lenders prefer a two-year work history. However, it is possible to get approved with less if you meet certain criteria. This guide details how to qualify for a mortgage with a short employment history and how to ensure that the loan approval process goes as smoothly as possible.

Is it Possible to Obtain a Mortgage with a Short Employment History?

Absolutely! While most lenders prefer two years of consistent employment, exceptions exist. Many loan programs allow for less than two years if you have a stable job, a good income, and a strong credit profile.

Important Aspects of Employment History Users Should Be Aware of Include:

• Stability: Current Job. Length of time you’ve spent in your current role and organization.
• Consistency: Earnings. The likelihood that future earnings will be higher than past earnings.
• Industry—Some industries are more forgiving than others (e.g., healthcare, technology, and skilled trades).
• Education: It could be counted as employment history if someone has recently finished schooling or job training.

The underwriting criteria of employment history for mortgages include:

What are the General Employment Requirements for Mortgages?

FHA loans, VA loans, conventional loans, and USDA loans all have distinct requirements. However, they all allow for exceptions:

Loan Type: Standard Employment Requirement Exceptions Allowed?

FHA Loans: 2 years preferred, 6–12 months possible with strong compensating factors Yes

VA Loans: No strict minimum, but lenders prefer 12 months.

Conventional Loan: 2 years preferred; 1 year may be accepted with strong credit Yes.

USDA Loans: 2 years preferred, but less may be accepted for stable jobs.

You only need to meet these requirements if you have been employed for over two years. If you are new to a job, your previous employment, education, and relevant experience will be considered.

How Do Lenders Qualify for a Mortgage With a Short Employment History?

Lenders will always look for a reliable source of income combined with job stability. If you have a history of undergoing several jobs in a short period, lenders will evaluate the following:

• Gaps: Any unemployment gap below six months is unlikely to raise questions. Explanations might be needed for gaps longer than that.
• Better Positions: Accepting a more lucrative position in the same industry is a strong positive indicator.
• Education as Work History: Lenders could consider that part of your work history if you recently graduated or finished training.
• High savings and credit score: Having a high credit score and savings helps counterbalance a short work history.

Ways to Get Approved for a Mortgage with a Short Employment History

If you have less than two years of work history, do the following to improve your chances of receiving approval:

Provide a Letter of Explanation (LOE) for Getting a Mortgage With a Short Employment History

Lenders have a requirement of LOE and use it to explain the provided work history. Your LOE should:

• Account for your limited work history with a suitable explanation (e.g., career change, graduation, moving).
• Emphasize the stability of previous jobs along with the income-earning potential.
• Offer proof like a diploma, employment offer letter, or pay stubs.

Mortgage With a Short Employment History: Show Strong Compensating Factors

Lenders might approve your case even with a short work history if you provide:

• A high credit score (typically above 620). Though as low as 580 will be accepted for FHA loans.
• A lower than average debt-to-income (DTI) ratio: Total debt should be less than 43-50% of gross income.
• A larger down payment—Employment concerns can arise, but offering a 10-20% down payment would greatly assist.
• Cash reserves: Proving that the borrower has cash savings amounting to 3-6 mortgage payments shows that they are financially secure.

Picking The Best Mortgage With a Short Employment History

Certain mortgage types are more lenient with employment history.

• FHA Loans: Accept less than two years of work history if strong compensating factors exist.
• VA Loans: Ideal for veterans and have relaxed work history requirements.
• USDA Loans: Allowable with a steady income and qualifying for a rural property.
• Non-QM Loans: For the self-employed or unconventional workers.

Can A Self-employed Individual Get Approved For a Mortgage With a Short Employment History?

Yes! However, most self-employed borrowers need two years’ worth of tax returns. Some lenders are more flexible and will accept one year of self-employment if the borrower previously worked in the same field.

• Bank statements, contracts, and business licenses can prove income stability.
• Non-QM loans can be considered if other lenders have turned down an applicant.

What If You Have Been Employed With Your Current Employer For A Short Period?

Moving from one job to another within the same industry is normally fine.

• However, job changes with a promotion or additional perks attached are viewed as favorable.
• Moving to a new industry may require more time working for your employer before qualifying.
• Jobs that pay by the hour or commission may require more time to earn a stable income.

What Documents Will Be Required to Verify Employment and Earnings?

All mortgage lenders will have their ways of verifying employment when qualifying and approving you for a mortgage loan. Usually, 30 days of paycheck stubs are required and a verification of employment through your company’s human resources department. If you are getting qualified for a mortgage with a short employment history, then your employment history for the past two years is required, as well as your current employers offer employment letters.

While Applying for a Mortgage, Lenders Ask for the Following documents:

• Last month’s pay stubs
• W-2 forms (for the last two years, if available)
• Employment verification letters
• Bank statements for the last 2-3 months
• Taxes for self-employed applicants

Is Short Employment History Mitigated by Having a High Credit Score?

Definitely! If your credit score exceeds 700, you may not have to worry about a job history. Good credit is perceived as financial responsibility and may be a great benefit.

• A credit score of 580+ for FHA loans might work.
• A credit score of 620+ improves chances for other conventional loans.
• 740+ for credit score will get better interest rates.

How Long Should You Be Working Before Applying for a Mortgage?

If you have a reliable income, 6–12 months may be all you need.

FHA, VA, and USDA loans are easier and more liberal.

Self-employed borrowers normally need two years, but some lenders will allow one year.

Can You Get a Mortgage with a Probationary Job?

If you are new at a job and are in a probationary period, you may still get approved for the mortgage from lenders. It usually depends on whether your employer allows you to confirm permanent employment after probation.

• You have worked in a similar position before.
• Your position has competitive pay along with a great benefits package.

Getting Approved with a Short Employment History is Easier Than You Think!

A short employment history does not instantly disqualify you from receiving a mortgage. Selecting the appropriate loan type, offering robust compensating factors, and collaborating with the correct lender can help you be approved and funded on your mortgage promptly.

Reach out to me if you need to get in contact with a lender that accommodates a short employment history.