FHA Employment Requirements 2024
FHA guidelines require borrowers to have a two-year work history, however, there are exceptions to the rule which would permit the purchase of a home without the two-year FHA employment requirement requirements.
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FHA Employment Requirements
The following are the employment requirements for FHA loans per the FHA handbook 4000.1. Lenders must follow the verification process as outlined by the FHA and may approve the loan with verifiable exceptions to the two-year employment rule.
- Lender must verify 2 year’s work history – The standard procedure for FHA approved lenders is to verify employment with the current employer. If the current job does not span at least two years, then the lender is also required to contact the prior employer.
- Employment does not have to be with same employer – Although the guidelines require a two-year work history, it does not have to be all at the same job. You can have multiple jobs over the past two years with different employers.
- Employment does not have to be in the same field – If you have multiple jobs within the past two years, they do not have to be in the same field. The lender will simply verify that your current job is stable and likely to continue.
- There can be gaps in employment with a letter of explanation – If you have a gap in your employment, you can provide a letter with a reasonable explanation for that gap. This is typically only required if the gap is for one month or longer.
- Two-year work history can be waived with exceptions – There are approved work history exceptions which would waive the two-year employment requirement for an FHA loan. Those exceptions are outlined below.
There is enough flexibility in the guidelines to permit gaps with an explanation, or verifiable exceptions.
Self Employed for Less than 2 Years
In general, FHA guidelines require self-employed individuals to have a full 2-year history with their current business. The lender is required to ask for your tax returns for the past two years detailing business income. However, an exception can be made if the borrower was employed in the same line of business before starting their own business.
FHA Without Two Year Work History Exceptions
The following exceptions are permitted if they can be verified by the lender.
- Full time student – with a copy of your college transcripts, you can get an exception to the two-year work history requirement.
- Active military service – verified by military documentation any active military service is an acceptable exception to the rule.
- Medical condition – Letter from a physician detailing a medical condition that prevented you from working with or without disability income benefits.
- Staying home to raise children – If you were a stay at home parent raising children, you can get an exception to the two-year work history rule. However, this is a bit more challenging to get approved and lenders may only grant the exception if your work stoppage is less than 2 years.
- Senior Citizens – Seniors do not have to be employed if their requirement income is enough to qualify for a mortgage. Read [FHA loans for seniors]
These exceptions are commonly approved by FHA lenders. If you believe that you meet one or more of these exceptions, then one of our FHA lenders can lively help you to get approved for a mortgage.
Employment History with 1099 Income
If you are a 1099 employee, you will need to have been 1099 for two years to be eligible for an FHA loan. The only exception that can be made is if you were working in the same industry as a W2 employee, then transitioned to 1099. Read more about getting an FHA loan with 1099 income.
FHA Employment Verification Process
The lender is required to verify that you are employed during the application process. They will require a written Verification of Employment (VOE) from your employer. Then, it is likely the lender will call your employer right before closing to get a verbal confirmation that you are still employed there.
Self employed borrowers may need to provide a letter from their accountant.
When is a Gap in Employment Acceptable?
For an FHA loan, you can have a gap in employment but you must have been fully employed for the 6 months before the FHA case number was issued for your mortgage.
The lender also must verify that you were fully employed for two years prior to when the gap in your employment began. That job does not have to be with the same employer for two years.
When is a Gap in Employment Not Acceptable?
There is enough flexibility in the guidelines to permit gaps based upon various reasons. However, taking a break from employment or not finding a job for an extended period of time is not going to be an acceptable reason for a gap in employment.
What if the Borrower Changed Jobs Often?
If the borrower has had at least three jobs in the past 12 months, the lender will need to verify with the current employer that the borrower’s employment status in the future remains stable along with the current income.
Related Articles
FHA Loan Requirements for Self Employed Individuals
FHA Loan Guidelines for 1099 income
Also read [FHA Loan Requirements]
