FHA Home Loans and the Two Year Rule
For example, how many years do you have as your own boss? Your lender may need to see two years of profit-and-loss statements to consider that income for your home loan. We explore such issues below.
FHA Home Loan Waiting Periods for Bankruptcy and New Employees
What about borrowers who want to apply for a new home loan after certain types of bankruptcy? Two years may be a typical waiting time in some cases.
And what about borrowers entering the job marketplace for the first time? You’ll need to show most lenders 24 months of employment history though that history does not have to be with the same company.
Banks.com notes, “In most instances, you'll need two years of work history in the same field to be eligible for a home loan. This requirement stems from guidelines set forth by Fannie Mae and Freddie Mac regarding conventional loan products.”
Making a Stronger Case for FHA Loan Approval
There are some exceptions to the two-year rule, but these exceptions are often circumstantial. For example, a high-paying and highly specialized profession such as legal work, medicine, or aviation may give the lender a reason to approve the loan even without 24 months in the job market.
Borrowers with or without such jobs may make their application more attractive to the lender if they have substantial cash reserves, investments, or other assets that make the mortgage loan a less risky transaction for the lender.
Even if you have plenty of time in your current career, bringing more cash to the table makes it easier for your participating FHA lender to approve your mortgage or refinance.
Waiting Out the Two Years
Some borrowers don’t have a choice but to wait out the two years after changing the nature of employment (from salary to contract, for example) or getting into the job market for the first time. For these future applicants, the best thing to do is to maintain good credit and loan repayment history during that two-year period.
Work on lowering your overall debt, lowering the amount you use your credit cards and focusing on getting and/or maintaining good credit.
The more you work on credit issues, the more cash you save toward your down payment, and the closer you get to the two-year mark in the job market or post-bankruptcy, the better. You can use the waiting time to your advantage, making your FHA loan application harder to deny when the time is right.
FHA Loans Have Eligibility Requirements
The U.S. Government Backs Mortgages Through the FHA
Financed Properties Must Meet FHA Minimum Standards
Do you know what's on your credit report?
Learn what your score means.