Buying a home will perhaps be the largest investment a family makes in a lifetime.
It represents a large sum of money and therefore requires careful lender consideration – including an applicant’s income and work history.
A stable two-year record of employment proves to the lender that the applicant is worthy of the large financial commitment.
However, what if an applicant has work gaps in-between? Here are some things to consider.
How long ago and how large are gaps?
As noted, lenders prefer borrowers with two years of consecutive work. Any gaps in employment before that may be a non-issue.
Generally, lenders will be concerned about work gaps in the last two years longer than six months. Any stoppage of work for just a month or two will not necessarily raise any red flags.
Reasons for gaps
Maternity leave, continuing education, and other valid reasons for work gaps will be taken into account.
Even if you took time off due to an injury or because of company layoffs, each applicant will be evaluated individually.
Lenders are very understanding of those gaps that were beyond your control or that reflect a major life change such as growing a family or earning a new skill or degree.
Be honest and explain
Improve your odds of mortgage approval despite employment gaps by being clear about work history and providing details.
Documentation, such as transcripts or medical notes, that explains employment pauses and movement provide evidence that lenders will appreciate.
Some events can be more difficult to readily document, such as caring for a loved one dealing with a medical issue. A simple letter discussing the circumstances of the caregiving, however, will usually suffice.
Applicants with greater employment gaps over the last two years can submit documentation that shows a proven track record over a longer period of time. This complete employment picture will boost your chances.
In addition, records of consistent on-time mortgage payments during times in which borrowers were not employed will be seen favorably, as well.
Most of all, applicants need to show the lender they are reliable and have a strong history of on-time payments, even when they were out of work for a short period of time.