Temporary unemployment: Not necessarily a barrier

In many situations, temporary unemployment will not exclude a potential borrower from qualifying for a mortgage. It is not always necessary for a borrower to be employed in the same position for at least two years or even in the same field of work, depending on other factors.

For example, during a two-year period, Martin Harris was unemployed for three months and had been with his latest employer for only 12 months. He was able to maintain his financial obligations while unemployed and had a FICO score of 734. He needed a house before he would reach two years with his new employer. When he consulted a lender, he was pleasantly surprised.

Because his FICO score was good and he had been employed for 12 months, he would not automatically be excluded from being considered for a mortgage. However, the lender would also consider the following:

Is Martin paid a salary or commission? Salary is considered to be more stable, but if he is paid straight commission, the lender will average his income over the last two years and qualify him based on that income amount.

Is he in the same line of work as before? If so, that also would be in his favor. If not, it is still a positive factor that he was with the same employer for the past year. Job stability is a factor that a mortgage lender will look at, and two years at the current job helps, but is not an absolute requirement. If Martin changed jobs but stayed in the same line of work, he should have no problem — especially if the job change was an advancement or increase in income.

What were the unemployment circumstances?  If he had done any work at all (such as consulting) during the time he was not employed, Martin should make sure the lender knows. Even if he spent the entire time job hunting or on a sabbatical, that would be fine; he just needs to make sure the lender knows what he was doing.

Other factors considered are the amount he would put down on the house, the condition of the property and his savings. Martin left the meeting feeling much better and was prepared for the documentation he would need to do.