The Pre-Approval Puzzle: Piece #2 — Employment
Posted on September 27th, 2011 by DarcyIn putting your pre-approval puzzle together, we look at things other than just credit. Though credit is such a big, anchoring piece, it’s also important to know about piece #2 — Employment.
Years ago, we had loans available for just about anyone — people who didn’t have jobs, those that didn’t claim any income and even those that didn’t have both! These loans were called no-income verification loans and for the most part, they just depended on the credit and asset merits of the borrower. Of course, there were even loans where we didn’t verify assets either. Buying a house with none of these things verified was truly crazy!!!!
Today, this is NOT the case. You need to have a job, preferably a stable one AND you need to have a history of working. Getting out of high school and being on a job for 2 months isn’t an acceptable duration any longer.
Lenders are looking for a 24 month history of employment, at a minimum. This history doesn’t have to be on the same job, though it does make your file stronger if this is the case.
Recently, many people have hit hard times with layoffs and down-sizing. As an example, maybe the last 2 years of employment history are spotty – just working 1 1/2 years, then 3 months laid off looking for work and finally starting back up. Due to this, we will go back further than 2 years to create that necessary 24 months history.
What about college graduates just getting started in the workforce? If the student had a history of working while going to school, we may have that 24 month history already. But many times, being a student IS their main job. In this case, we will look at the schooling as history; but more than that, we want to correlate their schooling (degree or classes they took) with the field they just started in. In this case, we may not need the full 24 month”work” history.
Back to the recent graduate — what if they can’t find a job in their field of study and have to settle for something else? First, kudos for finding and accepting work. That’s great. In this case, though, we will need to see at least 6 months on the job to show there is some history after their “job” as a student. As with many things in the loan process, we will look at each scenario on a case-by-case basis.
This leads me to stay-at-home parents. This is a GREAT thing to be able to spend time with your kids. Believe me, I know the drill. If however, you decided to take that time with the kids, whether it be 6 months or 5 years, and get back into the workforce, then we need to show a history of not only working prior to the time off, but also at least 6 months back on the job. Depending on how long the sabatical was, we may need longer than 6 months — another case-by-case situation.
Then, there is the part-time work moving to full-time work. This would be seen similarily to the above, in that we may want to see at least 6 months on the full-time job to show a history and the ability to work full-time.
Nutshell — working is a good thing and a necessary one in order to get a home loan. But it’s not just about working, as you can see, it’s also about duration. These tips will be true for any person on the loan in which we want to use income.
And speaking of income — that is the 3rd piece to the pre-approval puzzle that I will discuss in my next blog. Anything I can do to make the process more understandable for YOU is my ultimate goal!
