Many first time homebuyers are young, may have just graduated school and just started their jobs – how do they qualify for a mortgage?
We need to verify two years of employment for a mortgage – how do we do that with those that just graduated from college? We can use school as an employment history as long as your job is what you went to school for. Maybe you graduated with a teaching degree and are now teaching -we would get transcripts from your school to show you were in school for the past few years. Maybe you went to school and worked summers or even during the school year – maybe you worked in retail and now are working full time in retail – we use the part time job and the school transcripts to show your employment history.
How long do you need to be on the job? It depends on the type of mortgage you are applying for. Here are some guidelines:
Conventional loans: Two years of related work or education history
FHA loans: Two years of related history, you need to be on your current job for 6 months if you have employment gaps.
VA loans:Â Two years on the job, two years of related schooling, or two years in the military. If you are still active military, you must have more than 12 months before your release date.
The other piece to consider is what type of income do you have? There are different requirements for those that are self employed, get bonus or commission income or even overtime income. If you are get a base salary or hourly pay, we can use it immediately -sometimes even with just an offer letter. However if you get bonus or overtime, there are additional time requirements. Here are some guidelines:
Hourly pay: if your hours fluctuate, you will need a two year history
Overtime: lenders will average two years of overtime (unless it’s decreasing, then it may only be the year to date or possibly not used at all)
Bonus: You need a two year history of receiving bonus income
Commission: You need a two year history of receiving commission income, especially if it’s more than 25% of your income.
Second job: you need to be working both jobs for two years simultaneously
Self employed: you need two years of tax returns showing self employment income
If you aren’t sure about your situation, check with your lender. If your income has been decreasing, there will be issues. If you just changed jobs and are going from hourly or salary to a base plus commission, you may have issues – typically in this situation, we can only use your base salary.
The best way to know for sure is to talk to your lender and get a mortgage approval. Ideally if your income is questionable, your loan officer will verify your income and ask underwriting to go through your file before you buy a home. That way you know exactly what underwriting will use for income and what you will be able to qualify for in a home!
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc., An Equal Housing Lender, NMLS#150953 – Email – Website
