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I recently read that FHA requires a minimum of 2 years of work history. Does anyone know how strict they are about this?
A little background: After we graduated from college in 2005, my husband quickly fell into his current job (it was pure luck which even he admits lol), and he's been with the company for about 5 years now. I, on the other hand, wasn't as fortunate. It probably doesn't help that I have a psychology degree, but I searched for a full time job for years and just two months ago, I was FINALLY offered my first "real" position in cancer research (so I am using my degree somewhat, thank goodness). So that means I was unemployed since 2005. During that time, I was actively applying for jobs and interviewing but received no offers. Therefore I was primarily a stay at home wife (taking care of our apartment, chores, etc.). Needless to say, being unemployed for so long and having received one rejection after another, I'm very grateful that someone finally gave me a chance.
My husband and I are thinking about purchasing a home toward the end of this year since we already have a decent amount of $ saved up, and the majority of my paycheck now goes straight into savings. We thought the FHA route might be ideal for us because we don't want to put every dime of our savings down on a house (we want some leftover for remodeling and other costs), but I'm very worried about that two year work history requirement since I'll only have 1 year of documented experience. I've been told that they often make exceptions for stay at home moms or people who recently graduated from school, but I've been out of school for quite a while. Is there any hope for us or will we essentially have to wait another two years?
Have you ever been employed full time for 2 consecutive years? Even before you graduated? If so, and it can be documented, then it's possible that after 6 months on the job you may be able to qualify.
However since the gap between your graduation when you started full time employment is so long, if you do not have the 2-year full time employment history before then, you would very likely be looking at needing 12 to 24 months on the job before an underwriter find it acceptable.
Have you determined that you will need your income in order to qualify for the new purchase?
I tend to agree with where Shane was going, but, let's turn over every rock. When was your 1 year documented work experience? Unfortunately, there's an exception for mothers returning to the work place after an extended leave, but nothing for stay at home wives.
My opinion is you will most likely have to wait the two years to be able to count your income, but lets go look at the rocks. Not long ago, we could have gotten the loan through with 1 year and 6 months experience (or even less than a year), but many investors are going by the book, requiring two years. There are automated systems used, called DU or DO, and if the data is entered into the system correctly and the DU/DO approves your loan, you would need to find a lender that underwrites strictly to the DU/DO. Many (most) investors out there are adding additional requirements (what we call overlays), but there are a few that underwrite to the automated approval.........and while you would not qualify for an FHA manual underwrite (the 2 year rule), it's possible you may qualify for a DU/DO approval. (The exact phrase you want to ask loan officers qualifying you is, "do you underwrite to the DU, or do you have overlays, in addition to the DU?)"
AUS (automated underwriting system aka DU/DO) was originally designed to be an alternative full manual overwrite, which must adhere strictly to the guidelines. AUS will read the higher than average credit score, money in the bank and so on (what we call compensating factors), and will allow for some fudging in other areas, like your time on the job. However, the AUS will spit out the exact requirements........if it reads 2 years W2s, you know it won't fly. But if it asks for direct VOE (verification of employment form), you could have a shot. Unfortunately, many lenders have gone to a hybrid of underwriting to the DU, as well as, performing a manual underwrite. FHA isn't happy about the overlays, btw, and is actually opening some cases against some lenders. But HUD moves at the speed of sludge.
And, if all else fails, you could get a non-occupant buyer (cosigner) on the loan. This has to be a family member.
Last edited by SmartMoney; 01-08-2011 at 10:43 AM..
I worked for a major international corporation for 4 years then moved to a different state. Two years later I was rehired to work for the same corporation in the new state doing similar work at higher pay. Is there still a two year wait to use this income?
Kara - if you've been working at the same corporation at a higher rate of pay for 2 years already, then you've already waited the 2 years.
Normally there isn't a requirement to wait 2 years to use higher income if you are getting paid a higher amount. Only exception is commissions, overtime & bonus income needs a 2 year history.
Sorry, I wasn't clear. I worked for 4 years, resigned & moved to another state. Had a 2 year break, then was rehired by the same corporation and have been at the new higher paying position for 6 months.
I'm also a small business owner, but have been told the rates are more favorable if you have W-2 income.
I have a problem similar to jaxres206. From 1998 till 2005 I was employed. However after I moved to Ohio with my husband I was unable to find a job until 2008 and then had to leave 4 months later because I had to care for my son after he was born. It's been 2 1/2 years and I've been working for the past 6 months. Will a mortgage lender be able to count my work history back from 2005?
With FHA financing, after a long gap in employment (aka. "extended absence from the workplace") you often will need to be back at work for 1 to 2 years before employment will count. Like SmartMoney mentioned, there is an exception for stay at home parents, which your situation was, and then in that situation there needs to be a 2-year employment history prior to the absence, which you have. The part that is a little unorthodox for you is that prior to you staying home to raise your son, there was a 3 year employment gap and that may cause underwriters to require you be employed for the 1-2 years. What you should do is go for a pre-approval now, as that will be the only way you'll find out.
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