How to get a mortgage without 2 years of work history
Quick insights
- You may qualify for a mortgage without two years of work history by showcasing strong compensating factors like good credit, a substantial down payment or significant mortgage reserves.
- You may encounter challenges when qualifying for a mortgage without two years of work experience. Some include fewer lenders, stricter credit and income requirements and higher down payment requirements.
- Strategies like providing alternative sources of income, applying with a co-signer and avoiding job changes during the application process can help applicants with unique employment situations secure a mortgage.
Homebuyers must satisfy a few requirements to secure a mortgage. Among the documents required may be proof of two or more years of work history. For some first-time homebuyers or those with a unique employment situation, this may pose a challenge.
If this sounds like you, don’t fret just yet—you may still be able to get a mortgage without two years of work history.
Can I buy a house if I haven’t been at my job for 2 years?
Yes, it’s possible to buy a house with a mortgage if you haven’t been at your current job for two years. If you have good credit or are able to put down a substantial down payment, you may be able to skirt the work experience requirement.
Similarly, if you have mortgage reserves or can apply with a co-signer, you may have an easier time qualifying for a loan.
Understanding employment history for mortgage requirements
Lenders want to be sure you’ll be able to repay them on time. This is why employment requirements for many mortgages usually include verifying your income and a work history of at least two years. Lenders use this information to gauge whether you’re a good candidate for a loan and determine the terms of the loan if they decide to extend an offer.
Here are some of the ways that information comes into play:
- Ability to repay and risk assessment: Income verification and work history help lenders assess whether you’ll be able to repay the loan. Consistent employment and steady income may be signs that you’re financially responsible enough and have the stability to make your monthly payments.
- Loan terms and rates: Lenders also want to see work history and income information so they know what sort of terms and interest to offer on your mortgage. A low-risk borrower with consistent employment and income may qualify for better loan terms and interest rates than someone who doesn’t have as robust a history.
- Legal and regulatory requirements: In some cases, authorities may require lenders to consider work history as part of the underwriting process. This is essentially a process that helps lenders assess risk. Underwriting regulations help lenders show that they’re lending responsibly.
Challenges you might face trying to get a mortgage without 2 years of work history
While it is certainly possible to get a mortgage without two years of work history, it’s not necessarily easy. You might face some or all of the following roadblocks:
- Limited lender and loan options: Not all lenders are willing to work with applicants who have shorter work histories. The lenders that do might require more documentation to support your application.
- Stricter overall requirements: Because lenders can’t lean on the work history component of your loan application, they’ll examine other details (like your credit score or current income) more carefully.
- Higher down payment requirements: Some lenders will require more money down to balance out your application.
To help lenders, you’ll want to be as detailed and organized as possible when you start filling out your mortgage paperwork. Be transparent and open about any gaps or discrepancies in your employment history.
How to get a mortgage without work history
Getting a mortgage with less than two years of work history may feel like a challenge. But you may be able to reassure lenders you’re a trustworthy borrower with some compensating factors and moves.
Provide all sources of income
Think that the few thousand dollars you earned freelancing won’t count toward your work history when you’re trying to get a mortgage? Think again.
Make sure you’re including all sources of income when you go through the homebuying process, including payments from:
- Structured settlements
- Annuities
- Investment income or assets
- Alimony or child support
- Pension
- Disability
- Social Security
- Side jobs
Maintain good credit
Lenders look for signs that you’re financially responsible. A good, very good or excellent credit score may go a long way toward convincing them you’re capable of making timely payments and not overly saddled with pre-existing debt.
Apply a substantial down payment
If you’re applying for a mortgage with less than a year of employment, offering a substantial down payment may shed light on your financial health and commitment to the mortgage. This may look good to lenders who are on the fence because of your work history. A hefty down payment lowers the amount you’ll need to borrow and helps lower the risk associated with the loan.
Rely on mortgage reserves
Mortgage reserves refer to any assets you can quickly access if you need help paying mortgage payments. Seeing that you have two months of reserves may offer a lender security.
Plus, if you have significant cash reserves (at least six months of mortgage payments’ worth or more), lenders will likely want to see it. Knowing that you have access to these funds may reassure lenders that you can keep up your payments even if you have temporary financial issues.
Get a co-signer
If your work history isn’t cutting it, you may consider finding a co-signer for your mortgage loan. Banks consider co-signers on a case-by-case basis.
This typically requires a high degree of trust on the co-signer's part, as they’ll now also be liable to pay any mortgage payments you miss. So keep that in mind when considering who to ask.
In summary
The knowledge shared above may be helpful to some buyers, but it’s important to remember that every lender and every borrower is different. If you’re feeling insecure about your work history or about mortgages in general, seeking help from a lending professional may give you a better picture of your options. It may help you plan your next steps to getting you closer to buying the home of your dreams.
Thankfully, with some creativity and thinking outside the box, it’s possible to get a mortgage without two years of work history. Showing off your fiscal savvy might be your ticket to getting approved for a mortgage, whether you’ve been at home starting a family or traveling the world and finding yourself.
