FHA Loan - Less than 2 years employment history

Multi-Family and Apartment Investing
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FHA Loan - Less than 2 years employment history

Timothy Joost
San Antonio, TX · Member since 2012 · 1 post · 0 votes

Background: I & the wife are looking to buy a MF 4 unit property priced at $250k via an FHA loan. One of the requirements for the loan is that we have a 2 year continuous employment.

I have a 1 year gap in income(i.e. I was employed but not paid because I wasn't working on any project) Anyways, after that 1 year gap, as of today i have been employed and earning for 1 year and 7 months. So I am short of the 2 year employment requirement by 5 months. We have good credit scores (715 - 750)

Question: Due to this we have been declined a pre-approval by one bank and asked to come back in 5 months time. Another major bank has pre-approved us(based on all the info i gave them on the phone), but I fear that once we start closing, they will start reviewing all the info i gave and decline the loan at a late stage of closing.

I don't want to wait 5 months and risk somebody else picking up the house in that time. Nor can i put down 25% as down payment on a conventional(non FHA) loan.

What kind of creative financing strategy can be done here?

I am in San Antonio,TX. So if anybody is aware of any hardmoney lender, transactional lender, lenient banks, credit unions with any lenient loan products or any kind of creative financing strategy, that would be very helpful.

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  • Dion DePaoliPro Member
    Real Estate Broker · Northwest Indiana, IN · Member since 2011 · 2k+ posts · 2k+ votes
    14y

    I am not sure how the underwriter figured out you were employed but did not earn a wage. I could see how that could depress your wages but if it is the same employer, then you were employed. That does not necessarily create and exclusion for the loan. All that said, the originating lender has a reserved right to have a little bit more strict guideline than Ginnie Mae. So they could deny you.

    I would contact the current bank and ensure you discuss this point of concern and point out you were turned down once already. You can insist on underwriting feed back on the issue. That helps all involved. Nobody wants to work on a file that can't go through, not you or the lender. So it make sense to square this up firmly.

    In the event you do have to wait. Approach the owner and see if you can rent until then. It is not that far away and I suppose it might be investor owned with an open unit. Which brings to light another issue in and of itself. Are there any open units for you to move into if you can get the loan anyway.

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  • Nik Parks
    Astoria, NY · Member since 2013 · 40 posts · 4 votes
    13y

    Hey guys. I'm brand new to BP--this is my first forum post.

    Anyway, do you know if part time employment counts toward the two year benchmark? A mortgage lender told me that employment while being a full time student did not count. I've almost reached the two year post college work history benchmark. However, most of it is part time and freelance work.

    I'm an interactive designer so that kind of goes with the territory.

    Thanks!

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  • Lynn McGeein
    Real Estate Agent · Virginia Beach, VA · Member since 2012 · 2k+ posts · 1k+ votes
    13y

    Timothy, Could you get a letter from your employer stating your dates of employment showing the full 2 years? My husband was a merchant marine, so he would only show income for 6-8 months out of every year, even though he was technically employed full-time. They verified actual dates of employment and averaged our last 2 years' returns to come up with monthly income. On the other hand, my son found out he had to wait the full 2 years after college, even though he was a paid intern at the same company before graduation.

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  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    13y

    It's considered full part time work, which is counted. :)

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  • Jennifer Gibson
    Austin, TX · Member since 2012 · 17 posts · 4 votes
    13y

    @timothy I highly recommend you find a mortgage banker instead of approaching the big banks. I have a friend in similar situation and she was just pre approved. I have a couple of referrals if you want them...send a PM! The big banks love to say no if given the chance!
    Thanks
    Jennifer

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  • Grant P.
    Denver, CO · Member since 2012 · 218 posts · 48 votes
    13y

    I would get on the phone with every portfolio lender in your area, and see if they offer a product that helps your situation.

    Here in Colorado I have lenders that will write a conventional loan at 3% down no PMI if you are a first time home buyer. They would have no problem writing the loan with 1 year 7 months history assuming 640+ credit. This is just one example of a portfolio product.

    Get on the phone and see who is actually loaning their own money

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  • Nik Parks
    Astoria, NY · Member since 2013 · 40 posts · 4 votes
    13y

    Jennifer, the referrals you mentioned to Timothy…are they regional or national? If they're in the NYC area, would you mind sharing them with me as well? I can send you a PM.

    Thanks!

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  • Eric F.
    Real Estate Investor · Raleigh, NC · Member since 2012 · 427 posts · 297 votes
    13y

    Timothy Joost I met with a mortgage originator company (if this is the correct term) instead of a bank yesterday. I have 1 year of employment at my current job and before that I quit the workforce to travel overseas for a few months. According to them I can still get a FHA loan although my credit score is pretty strong which possibly makes a difference.

    Check around your local REIA or ask other local investors who they work with. The place I went with works with several investors and is active in our local REIA organization.

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