Your Mortgage: 4 things you need to know about gaps in employment during Covid-19

Charity Ohlund from Fountain Mortgage knows a thing or two about mortgages.

By Charity Ohlund

If you lost your job or had a gap in your resume during the Coronavirus pandemic, you’re certainly not alone. More than 22 million Americans experienced a job loss this year and millions more were furloughed, with many workers not out of the woods yet.

If you’re one of the individuals who lost a job and were rehired by a previous employer or a new one, you may be wondering how gaps in your employment record will affect your ability to secure a mortgage for a home purchase or refinance.

Here are 4 things you need to know:

1. Employment gaps don’t necessarily prevent you from being approved for a loan.

Loan underwriters certainly look at employment history during the approval process, but there’s no blanket rule surrounding a break in employment. It mostly depends on how long the gaps are and the reasons for the gaps. If there is a gap longer than six months, depending on the loan program, underwriters could require someone to be on a job for at least six months to get approved. However, this is somewhat flexible, especially if there is a good history of work prior to a lengthy (six months or more) gap.

2. The longer the gap, the more documentation your loan will require.

Short employment gaps may require some simple explanation requested by the underwriter, but generally shouldn’t ever be a problem. Longer gaps of more than six months are more difficult to get approved. But again, a solid and upwardly mobile work history prior to the gap is the best insurance.

3. Filling in your employment gap with two part-time jobs may not satisfy an underwriter.

The type of work you do to make ends meet during an economic downturn doesn’t matter much. Rather, loan approvals rely on a steady income flow. If you had a 40-hour/week job and are now working two part-time jobs, only one part-time job can be counted and the number of hours at that part-time job will need to be guaranteed by the employer. If the employer isn’t willing to put in writing that the hours are guaranteed, the income generally can’t be used to qualify for a loan.

4. Medical leave is different from an employment gap.

If the work interruption is due to medical reasons, underwriters will want proof of medical to explain. If no documentation can be found, however, that might be a problem. Be sure to document your medical leave as it relates to your job with your doctor and your employer.

If you’re wondering how job history, income, job status, or medical leave will affect your ability to qualify for a home purchase or refinance, please reach out to one of our team members at Fountain Mortgage for a personal consultation. We offer this service free of charge to help our clients – and our community – make the best financial decisions for their futures.