Gaps in Employment and getting approved for a KY FHA and Conventional Mortgage Loan
- A borrower who has no verifiable employment for 6 months or longer is deemed to have a gap in employment.
- Fannie: Fannie does not address gaps in employment in their guidelines. We must ensure that DU’s income documentation can be met. This will typically require the borrower’s most recent paystub and a W-2 from the most recent year.
- FHA: borrower must be employed at their current job for 6 months or more at the time of case number assignment and a 2 year work history prior to the gap can be documented.
Can income from employment that has not begun be considered effective income?
Expected income refers to income from cost-of-living adjustments, performance raises, a new job, or retirement that has not been, but will be received within 60 days of mortgage closing. The Mortgagee must verify and document the existence and amount of expected income with the employer in writing and that it is guaranteed to begin within 60 days of mortgage closing. Income is calculated in accordance with the standards for the type of income being received. The Mortgagee must also verify that the borrower will have sufficient income or cash reserves to support the mortgage payment and any other obligations between mortgage closing and the beginning of the receipt of the income.
For additional information see Handbook 4000.1 II.A.4.c.xii.(L) or II.A.5.b.xii.(L) available at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh
How does FHA view borrowers who change jobs frequently?
If the borrower has changed jobs more than three times in the previous 12-month period, or has changed lines of work, the Mortgagee must take additional steps to verify and document the stability of the borrower’s employment income.
The Mortgagee must obtain:
• transcripts of training and education demonstrating qualification for a new position; or
• employment documentation evidencing continual increases in income and/or benefits.
For additional information see Handbook 4000.1 II.A.4.c.xi.(A) or II.A.5.b.xi.(A) available at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh
How does FHA view borrowers who change jobs frequently?
If the borrower has changed jobs more than three times in the previous 12-month period, or has changed lines of work, the Mortgagee must take additional steps to verify and document the stability of the borrower’s employment income.
The Mortgagee must obtain:
• transcripts of training and education demonstrating qualification for a new position; or
• employment documentation evidencing continual increases in income and/or benefits.
For additional information see Handbook 4000.1 II.A.4.c.xi.(A) or II.A.5.b.xi.(A) available at https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh
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I have helped over 1300 Kentucky families buy or refinance their home over the last 20 years. Realizing that this is one of the biggest, most important financial transactions a family makes during their lifetime, I always feel honored and respected when I am chosen to originate their personal home loan. You can count on me to deliver on what I say, and I will always give you honest, up-front personal attention you deserve during the loan process.
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