How Long to Wait Before You Apply for a Home Loan
For those of us who need more time to get our financial house for various reasons, how long should a borrower wait to be ready? Naturally, the answer depends on the circumstances. We address some of the most common scenarios below.
FHA Loans After Unemployment
Much depends on the circumstances of your unemployment, but borrowers who haven’t worked in a while, then get rehired and want to apply for a mortgage loan should discuss the timing of the application with the lender.
In some cases, the gap in employment may not be such an issue, but in other cases, the lender may ask you to wait a specific number of months before trying to get approved or pre-approved.
Why bother asking? Because some circumstances are given more leeway. For example, in 2023, the FHA and HUD announced more mortgage eligibility for qualifying borrowers who had COVID-related unemployment issues or income gaps.
The FHA guidelines stated that those who found stable income following economic difficulty during the pandemic may be offered additional consideration for FHA loan approval based on their circumstances and the ability to meet qualifying criteria.
FHA Home Loans After Graduating From College
Lenders typically want a borrower to have two years in the workforce overall and at least a year or more in the current job to ensure it’s stable and reliable. Lender standards can play an important part in loan approval.
FHA Loans After Changing Careers
Have you gone from a salary job to being your own boss? Have you gone freelance or contract?
Lenders like to see two years of income from a new job to check the “stable and reliable” box, but some skilled professionals may have a shorter wait time, depending on the circumstances. Ask your lender, but expect at least 12-24 months in the new career as a requirement.
FHA Loans After Bankruptcy
Depending on the circumstances, you may need to wait one to two years after the DISCHARGE of your bankruptcy. Ask a participating lender what their standards are, but expect to sit out at least 12 months before applying again.
FHA Loans After Divorce, Separation, or Change in Family Status
There is no FHA guideline for the timing of loans during a change in family status. You should expect your lender to follow any applicable state laws related to community property and how it may be divided between two divorcing people. Not all states have them, but where they apply, they can be a complicating factor.
Your debt ratio may be affected by these laws where they apply, so be sure to talk to your lender about state law or other variables that may factor in.
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