Megan Woissol | November 23, 2022
Most people have heard that to get pre-approved for a mortgage loan, you’ll be expected to provide proof that you have had employment over the last 2 years. It might seem cut and dry, but there’s a few common myths we hear from borrowers that we want to debunk.
MYTH: You must have been employed at the same place for 2 years.
Some think that in order to get pre-approved, you must have been at your current job for 2 or more years. This is not the case. You can get pre-approved if you’ve just started at a new job, if you’ve recently switched from 1099 employment to W2 employment, if you have W2’s from multiple jobs over the past 2 years, and in some cases, you can get pre-approved with a new job offer in hand.
The most important thing to know is that your ability to get approved depends on your particular situation and your file as a whole. For instance, your pay rate (has it been increasing or decreasing?), whether you are paid hourly or salary, and inconsistency in the fields you have been working in can all affect your ability to obtain a pre-approval. In some cases, you’ll be required to provide additional documentation or explanation letters as part of the approval process. The best way to get clarity on your ability to qualify is to talk to a Loan Originator.
MYTH: A lapse in employment during the past 2 years automatically disqualifies you.
This is a very real concern for some borrowers, especially after the COVID-19 pandemic when many lost their jobs unexpectedly. Fortunately, a lapse in employment does not automatically disqualify you from getting a mortgage.
Many lenders will still offer you a pre-approval if your unemployment period is 6 months or less. Depending on the type of loan (VA, FHA, Conventional), you will be evaluated on a few different factors (savings, employment history as a whole, credit score, etc.) so underwriting can determine borrower consistency. Your Loan Originator can explain everything to you in more detail, particularly after they have had a chance to review your application.
MYTH: Recent college graduates cannot get approved.
It’s commonly thought that college graduates who are now working but were recently in school cannot get pre-approved as they have not been working for 2 years. This is a myth.
College graduates can state university attendance as a reason for a shorter work history, and in most cases can receive a mortgage loan if they can show a job offer (or that they’ve recently started a job) with appropriate compensation in a stable career track. Some graduates will have student loan debt, which will be factored into the debt-to-income ratio, but having student loans does not automatically disqualify you for a mortgage loan. As with most things, approval will depend on the borrower’s specific situation.
We’ve addressed common myths around employment, now let us discuss a fact. Knowing whether you can get pre-approved requires speaking with a Loan Originator who can review your file. There are many different, determining factors that vary based on loan type. Our talented team of brokers help you navigate complicated employment history and gaps and have more options to get you pre approved than a bank or direct lender.