Understanding Fannie Mae and FHA Guidelines for a Two-Year Work History

If you’re planning to buy a home, one of the crucial factors that lenders will consider is your employment history. Both Fannie Mae and the Federal Housing Administration (FHA) have guidelines for a two-year work history that you need to meet to qualify for a mortgage. In this blog post, we’ll explore the differences between Fannie Mae and FHA guidelines and what they mean for homebuyers.

Fannie Mae Guidelines

Fannie Mae is a government-sponsored enterprise that purchases and guarantees mortgages. When you apply for a mortgage through a lender, they may sell your loan to Fannie Mae, which means you’ll need to meet their underwriting standards. One of those standards is a two-year work history.

According to Fannie Mae, you need a two-year work history to demonstrate stable and reliable income. However, there are some exceptions to this rule. For example, if you’ve recently graduated from college, Fannie Mae will consider your education and training as part of your work history. Additionally, if you’ve had a gap in employment due to extenuating circumstances, such as a medical condition or a layoff, Fannie Mae may still consider you eligible for a mortgage.

FHA Guidelines

The FHA is a government agency that insures mortgages issued by FHA-approved lenders. Like Fannie Mae, the FHA requires a two-year work history for borrowers. However, their guidelines are more flexible than Fannie Mae’s.

According to the FHA, you need a two-year work history, but it doesn’t have to be in the same job or the same line of work. For example, if you worked as a teacher for one year and then switched to a job in sales, the FHA will still consider your work history. Additionally, if you’ve been out of work for a period of time, the FHA will consider other sources of income, such as alimony or child support.

Which is Better for You?

Both Fannie Mae and FHA guidelines are designed to ensure that you have stable and reliable income before you take on a mortgage. However, depending on your situation, one may be better suited for you than the other.

If you have a stable employment history and have been in the same job for at least two years, Fannie Mae may be the better option. On the other hand, if you’ve had multiple jobs in the past two years or have been out of work for a period of time, the FHA may be more flexible and accommodating.

Final Thoughts

Whether you’re applying for a mortgage through Fannie Mae or the FHA, having a stable work history is essential. By understanding the differences between these two guidelines, you can choose the option that works best for your situation. If you have any questions about your eligibility for a mortgage, it’s always a good idea to speak with a lender or mortgage professional who can guide you through the process.