One of the most frequent questions we hear is; “How does my job history affect getting a home loan after bankruptcy?” This question comes up so often after a Chapter 13 bankruptcy case, that was caused by loss of a job, or prolonged medical issues. Most people know that changing jobs, and job history can affect their chances of getting a mortgage. However, they aren’t sure exactly how their job history will affect their chances of getting a mortgage. Our team of mortgage consultants is here to explain in detail how your job history affects getting a home loan after bankruptcy.
Below are 5 points that explain how job history affects getting a home loan after bankruptcy:
1) Employ Gaps due to loss of job
If you lost your job during the great recession, or had medical issues that contributed to a loss of job this period of unemployment in your job history can affect your ability to get a home loan after bankruptcy. However, if you were able to find employment in the same field following your job loss, and can show two years of stable income at your new job, you should be able to count all your income towards your loan qualification. If you can’t show two years of stable income, then compensating factors will be required. These factors can include your qualifications for your job, time in the same field, increases in pay, as well as other mitigating factors.
2) Changing Industries
Many of our customers have changed industries after layoffs or during the recent recession. This change in industries can affect your ability to get a home loan after or during your bankruptcy. You must have two years history in the current position for your income to count towards your loan qualification.
3) Switching from a Salary to a Commission or Bonus Structure
If you switch from salary, to a commission-based pay structure, the incentive part of your pay must have been consistent for at least 12 months in order to count towards your loan qualification. If this new pay structure is less than 12 months, then FHA will count your income only if you kept the same position, with the same employer.
4) Changing from a W-2 Employee to a 1099 Contract Employee
Many people in 2018 now work as 1099 contract employees. If you have 2 years history in this new role as a contract employee then you should be fine. You will have to watch out for un-reimbursed expenses being deducted from your income calculation for mortgage purposes. While deducting these expenses may be a nice way to reduce your taxes, it will more than likely hinder your ability to apply for a home loan.
5) Employment Gaps Due to Medical Issues
Many of our clients getting a home loan after Chapter 13 bankruptcy have had an employment gap due to illness or medical complications. We will discuss the two main categories for medical employment gaps. First, for borrowers that had to take a temporary medical leave of absence, but returned to the same job. In this instance borrowers can count their current income towards their loan qualifications. Second, in the case of borrowers that lost income due to medical issues, and had to start in another position, the loan programs will consider whether or not the new position is in their same field of work or not. If you had to change fields, then other mitigating factors may increase the ability to use this income to count towards your loan qualifications. These mitigating factors include whether the new position is in the same field of work, and whether the job is likely to continue for at least 3 years.
Our team has Underwriters that are trained to look out for all the issues that face borrowers looking for a home loan after bankruptcy. They will problem solve and try to present options that make getting a mortgage possible.
Published (September 7th, 2018)
Author: Peoples Bank Mortgage