A Two-Year Work History is NOT Necessarily Needed!
In addition to verifying whether a borrower earns enough to qualify, lenders are required to verify the stability of a borrower’s income.
The “Two-Year Misconception” developed because the work history of many borrowers had reflected multiple jumps in career paths. For example. An auto mechanic who left to work as a plumber, who then jumped to automobile sales, etc. was deemed to have no stability in income or career.
On the other hand, if a borrower has a history of working in a field (education, medical, or finance, for example), yet has only worked for their current employer for a short time, chances are this income will be acceptable! If the borrower is salaried, the salary can be used. If the employee is an hourly worker, the borrower’s income may need to be averaged, or a verification might be needed from the employer representing the average number of hours worked per pay period.
What about an employee without a work history? For recent high school or college graduates just starting their careers, especially if they’ve secured a job in their field of study, it is likely their income can be used to qualify for a mortgage!
What about someone who is self-employed or who is paid as an independent contractor? Independent contractors are also considered to be self-employed by the mortgage industry. And the income earned by self-employed borrowers has always been considered less stable and less consistent than that of an employee. Thus, once a borrower becomes self-employed, that borrower must demonstrate a two-year work history – with their income averaged over those two years – before ANY of their self-employed income can be used to qualify for a mortgage.
Warren Goldberg is President of Mortgage Wealth Advisors, a Certified Mortgage Planning Specialist®, and a published author. His interviews include Blog-Talk Radio, Newsday, The Daily News, Anton Press, and the Long Island Herald. Since 1992, he’s been sharing his financial knowledge and wealth-building strategies, including how to properly use your mortgage as a financial tool. His clients regularly express their trust and appreciation by recommending friends and family call when in need of mortgage, real estate, and financial guidance.