Why a 6-month job gap on your FHA mortgage could be an issue
If you are buying or refinancing a home and you’re getting an FHA Mortgage and you’ve had a job gap in the last six months, this information is going to be particularly important as it relates to getting a home loan. The following is what you need to know.
If you are getting an FHA mortgage loan to purchase and refinance a home and you had a job gap in the last six months or so, you might have a challenge with your loan. The Federal Housing Administration added another layer of guidelines for documenting job history. The guideline states if you have had a job gap of more than six months you need to provide an additional two years of the previous income history.
Here’s where this can be considerably challenging. Most mortgage loan applications require a two-year job history to have stability for your income when it comes to getting a mortgage loan. So, for example, let’s say you had a job for the most recent in the last 1.5 years but then you had a job gap of more than six months. Now you need to provide an additional two years of work history. It can become murky if you change jobs multiple times or work for a company that is no longer in existence.
Simply put, for every six months of a job gap you must have an additional two years of employment. The good news is if you were previously in school full time, and you were staying in the field in which you are now working, the transcripts can be used to provide information in lieu of income documentation, i.e. pay stubs, W2s etc. This is particularly beneficial for first-time home buyers who are now graduating from college. They will have a job history via being a full-time student.
FHA remains the most flexible loan for now for first-time home buyers or move-up buyers who have unique financial situations, have less than perfect credit, or have little to no down payment. This loan also allows for a 6 percent seller credit for closing costs when purchasing a home and can be particularly important for those who have very little cash to work with when getting their foot in the door to buy a home.