A whopping 4.3 million home purchases are expected to go through this year, with buyers coming from all different backgrounds and walks of life.
If you see yourself in that figure, you might already be cutting back on luxuries to meet savings goals or working hard to increase your credit score. But have you given much thought to how your employment history is looking?
It’s an important but often overlooked part of the mortgage application process. Because the fact is, whether you’re purchasing your first home or your fifth, your employment history matters.
Why Your Employment History Matters When Applying for a Mortgage
When you’re working toward a mortgage, lenders take a look at a few different factors of your application. This includes your credit score, down payment amount, and employment history.
Lenders typically use specialized algorithms to analyze all these factors to determine how risky it would be to lend you funds. And, at the end of the day, one questionable risk factor has the potential to make or break your loan.
That’s right; a stable, streamlined employment history could potentially have a positive impact on your home loan, whereas, an unconventional employment history may have a negative impact.
So, your goal is to minimize risk.
When it comes to employment history, here’s what lenders are typically looking at:
Verification
Your employment history allows the lender to verify your strength as a borrower.
Gainfully employed individuals are viewed as more likely to repay their loans. So, proof that you currently have a job (and that you’ve held one previously) makes you appear less risky.
The amount they’re willing to lend you will also depend, in part, on your income — the higher the income, the higher the loan amount you might be able to repay. So, the lender needs to confirm that figure as well.
Providing your pay stubs, tax documents, profit and loss statements, and/or balance sheets helps the lender confirm that you’re employed and that your income is what you say it is.
Stability
Most home loan terms are long — either 15 or 30 years. The lender needs to feel confident in your ability to remain employed until the loan is repaid.
A stable employment history is one of the metrics they use to predict your future performance.
Stable employment typically means you’ve been working in the same field, with predictable income, on a full-time basis, for at least two straight years.
But this doesn’t necessarily mean you’ve held the same job for those two years.
If you’ve recently graduated, traded jobs within the same industry, or jumped to a new career for more pay, it probably won’t be a dealbreaker. But anything you can do to prove stability could help cut down on perceived risk.
And keep in mind that the closer you get to closing, the more that job changes will matter. If you switch jobs while under contract or during underwriting, it could negatively impact your loan.
Employment Gaps
Plenty of borrowers have some kind of employment gap on their resumes. They might have gone back to school, quit to take care of a family member, or experienced a temporary illness themselves.
All of these completely understandable scenarios illustrate exactly why gaps in employment history might be okay with most lenders. You may just need to provide some additional context, including writing a Letter of Explanation or submitting any supporting documentation.
The goal is to provide as much information as possible, so the lender can ultimately evaluate you fairly.
If you have longer or unexplained gaps in your employment history, it may not be the best time to apply for a mortgage. Working on building a stable history of at least two years could help strengthen your application in the future.
Either way, if you have any employment gaps, speaking to an experienced mortgage professional could help clarify the next steps.
Employment Type
The mortgage application process is typically a bit smoother for W2 employees. That’s because their income tends to be more regular and predictable.
Self-employed individuals, on the other hand, sometimes have variable income or more unpredictable tax situations. And some lenders are especially cautious when it comes to any kind of irregularity.
Obtaining a mortgage while self-employed isn’t impossible, though! These borrowers may just need to put in some extra effort, like providing additional documentation.
Whatever your employment type may be, adding an experienced mortgage professional to your homebuying team can help ensure your application is tailored to your unique situation.
Wrapping Up: The Impact of Your Employment History
Remember: Employment history is important, but it’s just one part of your larger financial picture. Do what you can to strengthen it, but don’t overlook the other factors of your application, either.
With good documentation, open communication, and the right mortgage pro by your side, your dream home loan could be well within reach.
And, hey, if it’s not in the cards just yet? Two years isn’t forever. And stability can start today.
Published on July 14, 2025
