How to Get a Mortgage Without 2 Years Work History, According to a Mortgage Industry Veteran

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It can sometimes be challenging to get a mortgage without 2 years work history, but it’s not impossible. If you’ve been at your job for less than two years, you may still have options.

It’s pretty much the industry standard in mortgage lending to require a two-year job history when applying for a purchase or refinance mortgage. However, lenders understand that life changes happen, so flexibility is built into the lending guidelines.

We’ll explain how to qualify for a mortgage without 2 years work history.

Why Lenders Like 2 Years of Work History

Mortgage lenders like a 2 year work history because it demonstrates stability. Income stability is important because it significantly reduces the risk of lending to you. It gives lenders confidence that you can earn a consistent living and meet your financial obligations.

Whether you’re applying for a conventional, FHA, VA, or USDA loan, expect lenders to ask about your employment history for the last two years. You’ll also need to explain any significant employment gaps.

How to Get a Mortgage Without 2 Years Work History

So what if you lack the required job history? Is it impossible to get approved? Not at all!

There’s more to a mortgage application than just your job. You can still get approved for a mortgage without 2 years work history.

If you don’t have a two-year work history, it doesn’t mean you don’t qualify. Job history is important, but there’s more to a mortgage application than just that. It’s still possible to get approved for a mortgage without 2 years work history.

Lenders understand that normal life brings changes and transitions from time to time, so they’ve built flexibility into the lending requirements. Here are some common scenarios that mortgage lenders are usually fine with:

  • Graduating from college or technical school and entering the workforce for the first time or as part of a career change.
  • Entering the workforce after military service, illness, a sabbatical, caring for elderly parents, or raising kids.
  • A career change from a different line of work.
  • Transitioning from a W2 position into your own business in the same field.

It’s possible to get approved for a mortgage with between 1 and 2 years of work history under these or similar circumstances. The key is to demonstrate stability and consistency with the rest of your financial profile.

If You Have Less Than 1 Year of Job History

If you have less than one year of job history, you may be able to get approved if you were previously in school or training for skills that directly relate to your current position. Lenders understand that education and training can prepare you to successfully generate a stable income in your current job.

If You’ve Changed Jobs a Few Times in the Last Few Years

It’s usually okay if you’ve changed jobs a few times within the last two years or have switched from one W2 job into another W2 job in a different field.

As long as your employment history shows stability, career progression, and consistent income, you should be fine.

However, if you’ve changed jobs excessively and/or have large gaps in your employment, that could be a problem. The lender may assume you have difficulty keeping a job and may decline your application.

It’s still possible to get approved for a mortgage without 2 years work history.

How Compensating Factors Can Help

If your application has compensating factors, you may get approved for a mortgage without 2 years work history. Remember, your application is more than just job history; lenders evaluate the risk of giving you a loan based on your entire financial profile, not just your job history.

Here are some common compensating factors:

  • Excellent credit – Ideally, you want your credit scores to be in the mid 700s or higher.
  • Low debt-to-income – If you don’t have a lot of debt, it demonstrates financial responsibility to the lender. Your debt-to-income ratio is an important approval factor.
  • Savings/reserves – Savings/financial reserves can often make the difference between being approved and declined. As a mortgage professional, savings, retirement accounts, etc., were my “go to” solution to get applications approved that were otherwise borderline. If your job history is spotty, you may get approved if you have savings and/or retirement accounts.
  • Significant equity in your home – If you have a lot of equity in your home, it reduces the risk that the lender will take a loss if you stop making payments and they have to foreclose. Less risk means a great chance of getting approved for a mortgage without a 2 years work history.

By emphasizing these positive aspects of your financial profile, you can demonstrate your overall financial responsibility and increase the likelihood of getting approved.

I’ve worked with clients who had spotty job histories, but were able to get approved with no problem because of reserves and excellent credit. Compensating factors can sometimes make the difference between approval and being declined.

If You’re Self-Employed

If you own at least 25% of the business from which you earn your income, you’re considered self-employed by mortgage lenders. This is true even if your business is a corporation that pays you W2 income.

Self-employment income is considered less certain than employment income, so the work history rules are more rigid than for wage earners. Expect lenders to scrutinize your application more closely and be less flexible on the two-year job history rule.

If you’re self-employed, it can be tougher to get approved for a mortgage without 2 years work history.

You will likely need to have at least two years of filed tax returns for your business to qualify. Lenders want to see a proven track record of success in your business before approving your mortgage application.

Your lender will likely ask for the following documentation:

  • The last two years of filed personal and corporate tax returns, including all K1s (if applicable), schedules, and pages.
  • The most recent two months of complete business bank statements (all pages, even if blank).

Your lender may also ask for a year-to-date profit and loss statement for your business. This doesn’t need to be audited or formalized by an accountant, but it needs to be reasonably accurate.

One Exception to the Two-Year Job History Rule

Though the two-year job history requirement is somewhat flexible for W2 wage earners, you’re probably not going get that same flexibility if you’re self-employed. Lenders are pretty much going to want two years of filed tax returns.

Having said that, there is one exception if you’ve been self-employed for a period of between one and two years. If you were previously a W2 wage earner before transitioning to self-employment in the same field, you may get approved.

Don’t Give Up If You’re Not Approved Right Away

If the first lender you call doesn’t approve your application, don’t give up. Lending guidelines are pretty standardized these days, but there’s still some variance from lender to lender.

If you don’t get approved the first time, try a few more lenders to see if you get a different result.

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Frequently Asked Questions

Can I get an FHA loan without 2 years employment?

Yes, you may still be able to qualify for a mortgage without 2 years work history. Flexibility has been built into the standard lending requirements for applicants graduating from college or technical school and entering the workforce for the first time or as part of a career change. You may also qualify if you’re entering the workforce after military service, illness, a sabbatical, caring for elderly parents, or raising children.

Can I get a mortgage without 2 years tax returns?

If you’re self-employed, the answer is generally no. If you’re a W2 employee, then yes, you may be able to qualify. Tax returns are usually not required for applicants with W2 income.

Can I get a mortgage with less than 1 year employment?

Yes, you may qualify under limited circumstances. If you were previously in school or training for your current position, there’s a good chance you’ll qualify. Otherwise, you may need to wait another year before applying.

Do I need 2 years of employment for mortgage qualifying?

Not necessarily. You may still qualify for a mortgage without 2 years work history. There is flexibility in the standard lending requirements if you’re graduating from college or technical school and entering the workforce for the first time or as part of a career change. You may also qualify if you’re entering the workforce after military service, illness, a sabbatical, caring for elderly parents, or raising children.
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Can I get a mortgage with less than 2 years self employment?

If you’ve been self-employed for between one and two years, you may get approved if you were previously employed as a W2 employee in the same line of work or a related occupation. Otherwise, you may need to wait until you’ve filed at least two years of tax returns for your business.

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About Mike Roberts

Mike Roberts is the founder of MyHECM.com, an author, and a highly experienced veteran of the mortgage industry. When he's not working, he enjoys spending time with his family, skiing, camping, traveling, or reading a good book. Roberts is the author of The Reverse Mortgage Revealed: An Industry Insider’s Guide to the Reverse Mortgage, which is available on Amazon.