FHA Loan Rules for Employment
The rules that defined these issues when this article was originally published were explained in HUD 4155.1. They noted at the time, but may now be different:
“To be eligible for a mortgage, FHA does not require a minimum length of time that a borrower must have held a position of employment. However, the lender must verify the borrowers employment for the most recent two full years, and the borrower must:
- explain any gaps in employment that span one or more months, and
- indicate if he/she was in school or the military during the most recent two full years, providing evidence supporting this claim, such as college transcripts, or discharge papers.”
The FHA has specific requirements for documentation of employment gaps and other related issues--these are explained in Chapter Four.
“When analyzing the probability of continued employment, the lender must examine:
- the borrowers past employment record
- qualifications for the position
- previous training and education, and
- the employers confirmation of continued employment.”
Have you been searching for a job for a while? Have you returned to employment? “A borrower’s income may be considered effective and stable when recently returning to work after an extended absence if he/she:
- is employed in the current job for six months or longer, and
- can document a two year work history prior to an absence from employment using traditional employment verifications, and/or copies of W-2 forms or pay stubs.”
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