Spotty Job History? Get a Mortgage With These Work-Arounds

It's a well-known fact that lenders look at employment history when considering applicants for a mortgage. Two years' history is the standard (though not absolute) metric that lenders typically examine. But a tough job market and high unemployment rates during the past few years means a lot of people may be looking for loans without a recent steady work history.

If you were unemployed or underemployed, changed jobs or don't think you'll qualify, here are some tips to help you get approved to buy a house.

Exemptions: When lenders look at work history, they take several factors into account. If you weren't steadily employed during the past two years, you may still be eligible for a loan. If you were in school, doing military service, or switching fields, many lenders take this into account and it won't negatively affect you. Even payments like alimony, child support, pensions, etc., are considered income and help your case if you're not working. And if you switched jobs, particularly for a position with higher pay, that may even work in your favor.

Explain your circumstances: If the circumstances above pertain to you, make sure you explain your situation and any gaps in information to your potential lender. Don't cover anything up -- you'll get caught, but even if you don't, the end result is a monthly payment you probably can't afford. Don't fabricate anything, and provide proof if necessary. For example, if you are or were self-employed, the lender may require an accountant to verify your income. You may also need tax forms and previous pay stubs. They want as much information as possible, to help speed the process along.

What's more important: Ultimately, loan underwriters want to determine your risk to the lender, which indicates your ability to make your monthly payments. In this, your credit history (how you have paid your past bills and debts) may be a more important indicator of your future habits. If you have a great credit score but a low salary, that shows you're great with budgeting and living within your means. Your debt-to-income ratio is important, and lenders prefer your total debt equals less than around 36 percent of your income. If you're unemployed but have enough funds to stay afloat, a potential option would be an asset-dissipation loan, in which your wealth could serve as your income.

Think it through: It's important to consider your decision very seriously. To become a homeowner, you need to have a reliable money flow, and lenders even look at how you make your money: salary, commission and bonuses are all weighted differently. Ultimately, the goal should be for you and your lender to come together and find a monthly payment that you'll be able to make based on your income and reliability. Perhaps if you don't have steady employment or income, it might not the best time for you to buy a home, and you should continue to rent while you get back on your feet.

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