Can You Apply for a Mortgage Without 2 Years of Working History?

Can You Apply for a Mortgage Without 2 Years of Working History

Table of contents

When applying for a new home mortgage, lenders look at a variety of different factors in order to determine whether or not a home buyer has the ability to repay the loan and how high a risk they may be to them. These factors can include your credit score, debt-to-income (DTI) ratio, and employment history. In general, a 2-year work history is required for most mortgages, however, compensating factors may allow you to still qualify for a new mortgage even if your 2-year work history isn’t perfect.

Key takeaways

  • In general, most lenders look for a solid 2-year work history to establish you have a stable income coming in to cover your new monthly mortgage payments.
  • Compensating factors, such as a large down payment, a high credit score, or large cash reserves, can compensate for imperfect work history.
  • Lenders may still approve borrowers without a 2-year working history when they have other forms of regular monthly income, such as through social security, pensions, or disability.

Can you get a mortgage without a 2-year work history?

It is possible to get a mortgage without a perfect 2-year work history, depending on your other circumstances, the lender, and the loan program you are applying for. Here are the basic employment guidelines for the most common mortgage programs.

Conventional loans

As the most common mortgage loan type, conventional loans require a minimum of two years of work history as well as being at your current job for a minimum of six months in order to qualify.

VA loans

Designed as a loan option servicing veterans and active duty service members, VA loans are backed by the Department of Veterans Affairs. Like most loan types, a VA loan is looking for at least two years of employment history. However, this can also include the time of service and education. If you are recently separated from service, they will be looking for current employment, or if you have a new job lined up.

FHA loans

Backed by the U.S. Federal Housing Administration and often considered more flexible than conventional loans, FHA loans do not have a specific employment history requirement. However, most lenders still require two years of employment history, as well as six months with your current employer.

USDA loans

USDA loans are backed by the U.S. Department of Agriculture and are a loan option for those looking to purchase a home in designated rural areas of the country. While they also require a 2-year work history, there is no current employer requirement.

Non-qualifying mortgage

Non-qualifying mortgages are mortgages that do not follow the more stringent guidelines set forth for other loan programs. In this case, there is more flexibility when it comes to employment history. However, because these are considered higher-risk loans, you can expect higher interest rates, upfront fees, and points.

Why do mortgage lenders require work history?

When applying for a home mortgage, the goal of underwriting is to help ensure that you have a stable source of income and the ability to make regular monthly mortgage payments. Proof of stable income and job security is one way they do this. A 2-year work history helps show stability, as opposed to someone that changes jobs every few months or has large gaps within their employment history that cannot be explained.

If you do have multiple jobs within a 2-year period, lenders also look for the type of jobs and the reason behind the change. For example, you will appear more stable if you have employer changes if the jobs are in the same industry and show growth, such as a more prominent title and higher income. On the other hand, multiple job changes with drops in pay rates highlight an inability to maintain steady employment.

Requirements to get a mortgage without two years of work history

While it is still recommended to have a solid two-year work history before applying for a mortgage, you can still get a loan application approval without it if you meet other compensating factors. When applying for a loan without a 2-year work history, there compensating factors can include:

  • The amount you have available for a down payment. Having at least 10 to 20 percent down decreases your loan-to-value ratio and helps reduce your risk to the lender.
  • Your ability to make regular payments. While you may not have a 2-year work history, lenders will still want to see that you have the ability to make your mortgage payments. They will require proof of your current earnings, such as W2s, pay stubs, tax returns, or bank statements. In addition, income can come in from another source, such as real estate rental income, social security, disability, and alimony.
  • Credit score. Without a solid work history, you will need a good to excellent credit score to qualify for a home loan.
  • Debt-to-income ratio( DTI). Your debt-to-income ratio is the total amount of monthly debt obligations you have in comparison to your monthly income. Without a 2-year work history, you will want your DTI to be much lower than the minimum lender requirement.
  • Cash reserves and investments. Do you have cash reserves available to cover six months of mortgage payments? Do you have substantial investments that can easily convert into cash? These compensating factors can make a big difference when you do not have a 2-year work history.

Addressing additional employment history factors

What if you have been employed for two years and can provide a job history to a loan officer, but there are gaps or changes in your employment? Here we take a look at some of the problematic items in your work history that can affect your ability to get a mortgage loan.

Gaps in employment

Gaps in employment can be a red flag to lenders as it shows you do not have a stable income source. While small gaps for a week or two are never really problematic, larger gaps can be a concern. However, with the recent COVID pandemic and lockdowns, larger employment gaps currently have a little less weight in loan decisions. Other times larger gaps can be acceptable, including layoffs, illnesses, welcoming a new baby, or the pursuit of higher education.

Changing jobs

A change in employment throughout your 2-year history can be acceptable or it can work against you, depending on the circumstances. For example, if you seem to bounce around to different jobs every few months that do not provide a pay increase or professional growth, you may be seen as unable to provide steady income. However, if you have changed jobs in order to increase income or for professional growth, such as a promotion, this can be of great benefit when applying for a loan.

Part-time jobs

Part-time employment often requires a 2-year history of part-time work which is then averaged over that two-year period in order to determine the average qualifying income to apply to the mortgage application.

No current employment

If you are not currently employed, it does not necessarily mean you will not qualify for a mortgage. Other sources of income can be considered instead of employment, such as alimony, child support payments, retirement income, rental property income, investment income, social security, and disability.

Rates and fees you should expect without a 2-year work history

When applying for a mortgage without a strong 2-year work history, you may appear as a high risk to the lender. While compensating factors may override the 2-year work history requirement, the lender may still view your application as risky. In this case, you may see slightly higher rates than you would if you had provided an adequate work history. In general, fees tend to be standard. However, you may see a slight increase in fees accessed compared to loans with a strong work history.

Buying a home without a steady work history

Regular unemployment, constantly switching jobs, or even large gaps in your work history can make you appear as a high risk to a lender and can often be enough for a home loan denial. But it doesn’t have to be. By understanding compensating factors and how they can counterbalance a poor work history, you may still be able to qualify and purchase the home of your dreams.

Helping borrowers find the right mortgage

With terms and acronyms like DTI, LTV, and compensating factors, applying for a home mortgage can often be overwhelming. Here at Hero Home Programs, our goal is to help our neighborhood heroes qualify and move into the home of their dreams while taking advantage of all the loan options available to them. If you have a questionable work history, let us help you secure the mortgage you need today. To learn more, schedule a consultation today.

Picture of Jacquelyn Sublett
Jacquelyn Sublett

I love teaching and writing on real estate, finance and mortgage topics. I find it fulfilling hearing stories of first time home buyers who we have helped with the home buying process. Writer for the Hero Homebuyer Programs™

Connect with the Author:

Recommended Posts

What Our Buyers Think

Jules S.
Read More
"5 star service is what you will get when you work with him!ᅠ Not only does he know his product like no other, he makes a special point of communicating throughout each transaction and his follow up skills are unparalleled. Perhaps most importantly, he delivers on his promises!ᅠ Give him a try for your mortgage needs.ᅠ You will not be disappointed!"
Jeremy H.
Read More
"An outstanding job handling refinances.  One of those knowledgeable, straight-shooters - which is really appreciated when you're shopping for a home loan. He can answer a million of questions with ease.  Looking back at the responsiveness, he was outstanding and you can do everything he suggested."
Jaina D.
Read More
"You can rely on them, very professional and quick in responding to your queries. He is very friendly and makes sure we understand the process and keeps us posted on the status of our loan. His efforts are greatly appreciated."
Eshawn W.
Read More
“By far the best lender we’ve worked with. Got us the best loan amount than any other lender. He worked with us hand in hand, he is professional, and he made the process enjoyable.”
Jaina D.
Read More
"You can rely on them, very professional and quick in responding to your queries. He is very friendly and makes sure we understand the process and keeps us posted on the status of our loan. His efforts are greatly appreciated."
Cass Z.
Read More
“I called looking for information about the process of applying for a mortgage/refinance and am just blown away with how helpful the information I received was!”
Stephanie F.
Read More
“I have hope because of you for making my home ownership dream come true. I feel such a connection with you and am excited to work with you. Have an amazing day!”
Rachel S.
Read More
"Highly ethical, attentive and helpful! A fantastic combination of personable and hard working. He makes everyone feel important and understood."
Cliff S.
Read More
“Hands down the best mortgage professional I’ve worked with in 20 years. Knowledgeable, honest, reliable and above all an outstanding communicator.”
Jose A.
Read More
"He worked on getting the lowest rate and kept me informed on each step of the process from the beginning to closing. Thank You!"
Nicholas H.
Read More
“Thank you for your prompt help and AMAZING assistance. Hands down, best lender I have ever worked with. Top notch!”
Read More
“I would be 100% interested in working more with you! You have proven to be an amazing lender”
Sandy C.
Read More
“Absolutely the most knowledgeable, friendly and honest expert I’ve ever worked with!”
Steve R.
Read More
"A pleasure to work with. He was very prompt and courteous with his responses and genuinely cares about the clients he works with."
Kevin H.
Read More
"Professional, responsive and honest assistance with the whole refinancing process from beginning to end."

We help you reach home ownership.

No catch. No hidden fees.

Have you served in the military or your community as a healthcare provider, teacher, or first responder? Are you a member of your local union or work for your city government?

Are you looking to buy a home but don’t know where to start when it comes to finding your best home financing options?

At Hero Home Programs™, our teams are dedicated to helping community heroes like you through the home purchasing process by finding the best grants, rebates, and loans in your area in order to maximize your savings and help you achieve homeownership.

Contact our team today to learn how we can and mortgages can change your life.

Resource Guides

Complete A to Z guides on your home purchase journey.

Learn about the process for getting a home loan

What steps you can take to improve your credit score

Tips and tricks for moving into your new home

Your step-by-step guide for buying a new home

Scroll to Top