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Do you have a gap in your employment history

Job gaps. Gap in your employment history. This is something that used to be pretty straightforward. Although it’s changed recently.

The old rules – gap in your employment history

It used to be if I got a loan application from somebody that’s been away from work for six months, they just have to be back on the job for six months. So if you’ve been out of work for six months and you’ve been on the job for two months, that’s a problem. If you’ve been away from work for six months and you’ve just got a new job and you’re starting next week, that’s a problem. You have to wait six months.

The new rules – gap in your employment history

However, that’s all changed. Now, supposedly, it’s just using logic. I had a client where they had taken four years off literally to go sail the world. Comes back, decides they want to get a house and a mortgage. And I thought there’s no way. I was still operating under the old assumption, six months gap, six months back on the job. I don’t know what the requirement would have been under the old guidelines for a four-year gap.

But I talked to my underwriter and they said, “Well, where is he working?” “Right back at his old job from four years ago.” It’s salary that’s seen as stable. Income is more than enough to support the mortgage that he needs. It’s higher than four years ago. Of course, inflation took care of that. And he had a nice down payment. And the underwriter said, “I’d make that loan. No problem.”

So now, gap in employment is more of a discussion.

Just keep in mind, while there’s no hard-and-fast rule, it’s a discussion. So if you’ve been home with a child for quite a while and you’re just back in the workforce, doesn’t mean you can’t get a mortgage. But you better discuss it with your mortgage lender. Did you do anything during that time of being at home with children, contract work, temp work. Or is it just truly a gap and I wasn’t working at all? Again, may not be the end of the world, but you better bring it up.

I’ve had people where they’ve been going to school for years and now they’ve got a job in their field. That’s fine. You just have to document with school transcripts, your schooling history. So gap in employment is a really interesting discussion. And that’s the point, is if you’ve got a gap in your employment, even if you’ve been on the job for a year and you didn’t work for a year or two years or five years or three months or something prior to that. Again, probably not a problem. You’ve been back on the job for a year. Bring it up, talk to your loan officer, see if it’s an issue. Just have the discussion. That’s the point. Thanks.

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