Getting a Mortgage Without a Perfect 2-Year Work History

A dependable income is a must for getting a mortgage. Lenders want evidence that you'll be able to repay a loan, so typically they like to see a steady two-year work history with a stable or rising income.

"The more consistent your job and work history are, the better," Scott Lindner, national sales director at TD Bank, said via email.

But that doesn't mean any kind of job change or employment gap will sink an application. Here's what to know about qualifying for a mortgage if your work history is a little outside the box.

Job or career change

You don't have to stay in the same job, or even in the same career, for two years to get a mortgage.

"It's not as important that an applicant have a specific job or be on the same career path," Lindner said. "What is important is providing proof of consistent income during the transition."

So if your income remains steady or increases, switching jobs before you apply for a mortgage shouldn't hurt your chances.

However, a change in the type of pay, such as a recent move from a salaried position to a commission-only or self-employed role, would make qualifying tougher. To count self-employed, commission or overtime pay, a lender usually wants to see a full two-year history of that type of income to get a reliable average, says mortgage broker Channing Moore, owner of Bayou Mortgage in Lake Charles, Louisiana.

Another complication would be a job change during the mortgage application process. If that happens, call your lender right away.

"If you're a conventional borrower, you can usually produce a pay stub [from the new job] or even an offer letter, and you may be OK," Moore says. With a government-backed loan, "you'll need 30 days of paystubs to move forward."

Employment gap

It’s best if your mortgage application reflects no employment gaps in the last two years. But life can be bumpy. Perhaps you were laid off, went back to school, took parental leave or needed to take care of a sick family member.

A lender may ask for an explanation and documentation to back it up, but a gap of up to six months isn't a deal killer.

"The best way to navigate this during the mortgage application process is to be upfront and honest with your lender," Lindner said.

What about a gap longer than six months? Lenders will apply more scrutiny, but you still might qualify. For loans backed by the Federal Housing Administration, U.S. Department of Veterans Affairs or U.S. Department of Agriculture, you'll need to be employed for at least the most recent six months, Moore says. For a conventional loan, you'll need to be employed for at least the last 30 days.

New job out of school

It’s possible to qualify for a mortgage if you just started a job after completing your schooling. Education can count as work history, whether it’s a doctoral program or trade school, Moore says.

Requirements vary by loan program. Your chances of success will be higher if your job is related to your degree, Lindner said.

Just finished medical school? Some lenders, like TD Bank, offer special medical professional mortgage programs for physicians, medical residents and dentists. The programs have low down payment requirements, don't require private mortgage insurance and allow higher debt-to-income ratios than traditional mortgages to accommodate those with medical school debt.

Self-employment

Self-employment isn't a roadblock to a mortgage as long as you can prove a history of steady income from your business. Lenders generally want to see two years of business tax returns, year-to-date profit and loss statements, and sometimes business bank statements, Lindner said.

"As with any borrower, self-employed professionals can increase the chances of qualifying for a mortgage by keeping an eye on their credit score, monitoring their debt-to-income ratio and getting their paperwork in order to submit with a lender," he added.

Retirement

For retired applicants, lenders consider income from sources such as Social Security and pensions, rather than employment. Retirees can also qualify using "asset dissipation" — the drawing down of savings and retirement accounts.

"But using asset dissipation may require additional verification and analysis and may also have tax implications," Lindner said. "You should always speak with a financial advisor in addition to a mortgage professional to understand your unique circumstance."

Compare lenders

Regardless of your work history, compare at least a few lenders to find the best combination of rates, fees and customer service. And if you have questions about whether your recent employment meets the mark, reach out to mortgage professionals to discuss your options.