How long do you have to be at a job to get a mortgage?
Scoring your dream job can also bring you closer to the American Dream: homeownership. Now that your job hunt is over, you might be itching to join the homeowner's club.
You're not alone. As of 2022 nearly two-thirds of Americans achieved the goal of owning a home. The homeownership rate is up nearly 3% compared with the second half of 2019.
So if you’re starting to wonder, "How long do you have to be at a job to get a mortgage?" your question is understandable.
But what do lenders think?
Lenders want evidence that borrowers can afford their monthly mortgage payments. A steady income goes a long way in reassuring them.
Generally speaking, mortgage lenders target at least two years of steady employment with no gaps, usually in the same industry.
But there’s no hard and fast rule, and every mortgage lender sticks to its own set of standards. And these days, banks are no longer the only game in town.
The rise of online lending has paved the way for greater flexibility in obtaining a mortgage. So just because you don’t have a lengthy work history doesn’t mean you are disqualified.
If you are among those wondering how long you need to be employed to get a mortgage, keep reading to learn what to expect on your journey to homeownership.
Mortgages and jobs
The process of buying a house is a unique experience for everyone. But one thing you can count on is that a potential lender will want to verify your current employment.
There's a formal process known as the Verification of Employment, or VOE, in which the lender will request written or verbal conformation that your job status is current.
Lenders will look for information such as where you're employed, your specific role, how long you've been there, and the future viability of this job.
They will also consider your income to determine whether or not you can afford monthly mortgage payments. So it's fair to ask how long you have to work to get a mortgage.
Experts suggest that if you're planning to change jobs, you might want to secure your mortgage first. Of course that's not always possible.
Traditionally, how long do you have to be at a job to get a mortgage?
The most traditional of lenders will not only require that you have two years of job history, they'll also want it to be at the same company. That is a lot to ask from today’s workforce, where people change jobs more frequently than ever before.
Fortunately, that was a rule of thumb established when financial institutions, aka banks, were doing all the lending. Times have changed, and so have mortgage lenders and borrowers.
Fintech is changing the rules
Fintech innovation has introduced simplified applications and a streamlined approach to mortgages, including harnessing data through tools like artificial intelligence (AI) to assess a person’s creditworthiness.
This has benefited borrowers and given people a shot at home ownership who might otherwise have been overlooked by banks.
In 2022, non-bank lenders were responsible for $1.4 trillion in mortgage originations. Fintech lenders like SoFi, Blend, and Better.com all participate in the online mortgage lending universe across the U.S. market.
Meanwhile, Millennials switch jobs, on average, once every two-to-three years, and can expect to entertain multiple careers during their working years. So it might be challenging for them to meet the two-year, steady job requirement.
With 56 million people in the workforce, the Millennial generation now represents 35% of the U.S. workforce, and rising. By 2025, that number is expected to grow to 75%.
Lenders probably won't want to miss out on their share of the income pie by overlooking potential borrowers who change jobs often. Income is still paramount, but communication can go a long way, too.
Getting a mortgage in the modern world
How long you've been at a job will matter less when getting a mortgage if you can check other boxes, such as a low debt-to-income ratio.
The key to remember is that lenders need to feel confident that you’ll be able to make your mortgage payments.
Mortgage lenders will lose less sleep if you are changing roles within the same organization, or if your move was to a higher-paying job at another company.
And as long as you are proactive about communicating these transitions, you will increase your chances of getting a mortgage no matter how long you’ve been at a job.
You don’t need to get hung up on how long you need to be in a job to get a mortgage. Instead, take proactive steps to better your chances of getting approved for a mortgage, including:
- If you’re starting a new job and applying for a mortgage, request a letter of intent from your new employer stating you are in the process of being hired
- If you’re changing roles within the same organization, request a title change letter to reflect that
Share the results of either of these letters with the mortgage lender.
You may also request your own VOE, which is either a verbal or written confirmation about your status from the new employer.
Last but not least, if you’ve already begun your new job, start collecting your pay stubs to prove that you are duly employed and getting paid.
Your income plays a key part in a mortgage lender’s decision, but it's not the only credit criteria they will consider.
So, if you're still concerned about how long you have to be at a job to get a mortgage, try shifting your focus to other credit criteria and accentuate the positive.
This is especially true if you are new to the workforce and have not yet had the chance for long-term, gainful employment. Areas to focus on include:
Your credit score—the higher your score, the more attractive the interest rate you are likely to qualify for on your mortgage. Most lenders will require borrowers to have a minimum credit score of 620 to be approved for a mortgage.
A low debt-to-income ratio—This ratio reflects how much income you earn in relation to how much debt you owe. It is determined by dividing your monthly debt obligations by your monthly gross income. 36% or below is considered a solid DTI ratio.
Savings: Cash in the bank, investments, etc. This can offset any concerns around steady income and how long you have to have a job to get a mortgage.
Down Payment: A down payment on the new house in the ballpark of 20% or more shows you have a substantial personal investment.
Buying a home is one of the biggest financial milestones you can achieve in life. You won’t want to rush it anymore than the lender does. But if you feel that your tenure at a job is holding you back, you might be able to overcome this hurdle.
With so much competition among non-bank lenders, and other criteria that weigh heavily on a lender’s decision, there is more at stake than simply how long you have to be at a job to get a mortgage.
The bottom line is you may not have to wait two years before you qualify for a mortgage to buy the home of your dreams. There are many other factors that can work in your favor.