Clients need to understand their employment history is a piece of the mortgage application puzzle.
Clients need to understand their employment history is a piece of the mortgage application puzzle.
Did you know that the average job tenure in the United States is now just 3.9 years, the lowest figure since January 2002?
While that’s still over the two years of employment history you might recommend, it shows how modern approaches to work are changing and evolving. That means you might have more clients curious about what their unique work history means.
Borrower questions like, “How does employment history impact a mortgage application?” can provide the perfect opportunity for mortgage professionals just like you to ease any anxieties, promote borrower education, and overall ensure your clients secure the loans they want and need. Talk about a win-win-win!
So, let’s dive into some of the most common borrower questions surrounding employment history as related to mortgage applications and their comprehensive answers:
“How Does Employment History Impact a Mortgage Application?”
There’s a decent chance at least a few of your clients will ask this very broad question first.
Start by explaining that mortgage lenders will take a look at their employment history, but that it’s just one factor they’ll consider.
Then, you can go into what their employment history might say about them as a borrower. Here’s a sample script you can use:
“Your employment history helps the lender get a feel for your ability to repay a loan. Past behavior can be a good predictor of future performance so, in theory, if you can demonstrate consistent, regular income, you’ll be better able to pay the lender back eventually.”
“Can I Get a Mortgage Loan with Little to No Employment History?”
If your client doesn’t have much work experience, this might be their next question.
Of course, borrowers in this bucket might need some more personalized guidance. Use this question as an information-gathering opportunity. Get clear on just how much work experience they have, whether any educational experience might count in place of traditional work experience, and what their reasons are for a limited employment history.
Depending on the borrower, they may still be able to buy. Or your advice might need to include waiting a year or two. Whatever the case may be, make sure you approach this question with honesty and compassion.
“How Does Length of History Impact a Mortgage Application?”
Whether your clients are brand-new to the workforce or seasoned pros, it’s important they understand how tenure could potentially impact their application.
Be sure to hit these key points in your answer:
- The overall goal is proof of consistent, stable income.
- Ideally, borrowers will have been employed for at least two years, with their income remaining steady or increasing.
- It’s important to note that lenders have their own requirements, though.
- It’s not the end of the world if the borrower hasn’t been at the same company or in the same role for two straight years—just that they’ve been employed.
- Borrowers should try to avoid changing jobs during the application process! Be sure to emphasize this piece.
You might even consider a handout or email newsletter containing all the information above, so buyers can chew on your words even after they leave your office.
“How Do Gaps in Employment History Impact a Mortgage Loan?”
You might have some clients who took time off to raise kids, care for a relative, or even travel the world. Of course, they’ll probably wonder how these gaps might impact their potential future home loan.
Depending on the gap, you’ll want to approach this question carefully. It’s important not to impart shame, particularly if the gap is emotional in nature. At the same time, clients need all the facts.
Here’s a sample script you can start with:
“Some lenders may balk at big employment gaps. That’s because it can raise questions about the borrower’s ability to repay the loan.
Small gaps, like those under six months, may be okay. This depends on the lender, and we might need a detailed explanation and documentation.
If we can’t find a solution, it might be a good idea to wait a year or two, as this gap will be less relevant.”
If it looks like the client should wait, leave space for any emotional response they might have. Remember: Homeownership is the ultimate dream for a lot of Americans. Putting it off can really hurt.
Final Thoughts: Answering Borrower Questions Around Employment History
Diving into their employment history, whether it’s lengthy or not, might be intimidating to many of your clients. Remember: They can’t necessarily see how each piece of the puzzle fits in as they don’t have the inside, industry expertise that you do.
But employment history doesn’t have to be a big barrier in their path to homeownership! That’s why it’s so important you use their questions as opportunities to demonstrate value, grow understanding, and overall champion financial education to closing day and beyond.
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