Importance of steady employment in getting a mortgage

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Is it important to be employed for 12 months when applying for a mortgage?

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Hi Lucy,

I think this is an interesting question that you put forward. I shall try to give you a satisfactory answer.

Lenders do try to assess the risk level involved in giving away a loan to a person by reviewing his employment record. In general they prefer a person, seeking loan, with good employment history preferably for two years.

But that is not always important. Even if somebody is unemployed or had frequent job changes, there are loan programs available for them although the interest rates may be higher.

Usually lenders are able to verify the income in three different ways depending on how the payment is received.

The types are -

Full documentation - This is applicable when a person gets his W-2 form which is the statement of his wage and tax statement and receives documents of his gross income as well as year to date earnings.

Stated documentation - If a person is self employed then stated documentation comes into play, which involves documents of tax returns for that person.

No documentation - This is applicable when a person is unemployed or had significant gaps in employment.

Lenders assume least risk with full documentation borrowers and most risk with no documentation borrowers. But as mentioned earlier, no documentation borrowers can qualify for a loan with higher interest rates. It would be a lot more easier to get a loan if somebody has a Spotless Credit. So, if you have a good credit history then you are going to get an added advantage.

Regards,
Blue

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In the sub prime arena there are numerous niche programs that fit most everyones situation. For sub prime it may not be important to have a 12 month work history and may go stated or no doc loans if you have a minimum FICO score and verification of the income that you state (for stated loans) can be verified from bank statement or w-2 or 1099.

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Hi!

I have heard that subprime loans are of great help to those with bad credit but they often demand a large down payment if you buy a house and also charge a high interest rate.

Harry.W

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I agree with harry, in subprime loan the interest rates charged are really high and i know few people who are suffering due to subprime loan

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Hello,
On the contrary. If your friends have limited access to subprime programs then yes they may have to put a down payment. There are programs that offer 100% financing of a mortgage with a minimum credit score of 560 (which requires no down payment).
There are people with great credit history or great credit but need financing such as a stated doc loan because may be self employed.

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Thanks to all,
For your valuable advice.
I would like to know to Cliff which program are you indicating by mentioning 100% financing with a credit score of 560?

Regards

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Lucy,
If you were at least in the same line of work for the past 2 years (despite you being in your current job for less than 1 year) I would suggest a full doc 100% loan with your scores of 560.

If you have been in this line of work that you are currently holding, then I may suggest another type of loan program for you.

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I would like to know in the latter case what would you suggest?

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HI!

I have heard that some lenders offer 100% financing with credit score of 560 and these loans often have interest-only option which can lower your monthly payments for the time being. There are also the 103% and 125% home financing methods that are offered at 560 score.

There is also the option of 80/20 financing in case you wish to buy a house. This involves two home loans ? one having a LTV of 80% and the other has the LTV of 20%. Basically this is a zero down payment financing option.

Cliff · Posted: Wed Oct 05, 2005 6:27 pm Post subject:

Suzanne,
You are correct!! We have a program that offers you 100% financing with a mid score of 560. This program is for purchases utilizing an 80/20 program and yes because this is an 80/20 you would not need a down payment for the loan.

Cliff and Sandra

[Edited by Sam - Email address removed as per forum policy.Thanks]

Caron · Posted: Wed Oct 05, 2005 6:35 pm Post subject:

Hi Cliff,

Welcome to MortgageFit forum.

We are really getting valuable suggestions from you. Thanks a lot for helping this community to grow.

Regards,
Caron

Cliff · Posted: Wed Oct 05, 2005 7:33 pm Post subject:

Hi Caron,
Appreciate the great comment. If we can help people get into their homes then that brings a sense of satisfaction.

Cliff and Sandra

[Edited by Sam as per forum policy. Thanks]

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