- Most W2 salaried employees can qualify for a mortgage using a signed offer letter and their first pay stub.
- Income from commissions, bonuses, or self-employment generally requires a one to two year history to be counted.
- Lenders prioritize stable and continuous income, which can be demonstrated even with a recent job change.
How long do I need to be at my new W2 job to qualify?
One of the biggest myths in home buying is that you need a two-year history at your current job to get a mortgage. For most borrowers with a standard W2 salaried position, this is simply not true. Lenders are primarily concerned with the stability and continuity of your income, not the tenure at one specific company.
In many cases, you can be approved for a conventional, FHA, or VA loan right after starting a new job. If you are moving to a similar role in the same industry and receiving a salary, lenders can often verify your new income with just two key documents:
- A signed offer letter on company letterhead that details your position, salary, and start date.
- Your first pay stub from the new employer, issued within 30 days of your closing date.
An underwriter’s goal is to confirm that your income is reliable and likely to continue. A salaried position in an established field provides that confidence. For example, if an accountant with five years of experience moves from one firm to another for a higher salary, a lender sees this as a positive career progression, not a risk.
Example: Sarah works as a graphic designer and just accepted a new salaried position for $95,000 per year, a raise from her previous $80,000 salary. Her start date is June 1st. Her lender collected the signed offer letter and waited for her first pay stub on June 15th. With those documents, they were able to approve her loan for a scheduled closing on June 28th.
What if my new job is salary plus commission or a bonus?
When your compensation includes variable income like commissions or bonuses, the rules change. Lenders cannot rely on a future potential for earnings; they must verify a history of receiving that income. For this reason, only your guaranteed base salary will typically be used for qualification if you've just started.
- Commission Income: To use commission income, most loan programs require a 24-month history of receiving it. The lender will average your earnings over that period. If you switch to a new commission-based job, you will likely need to establish a new track record before that income can be counted.
- Bonus Income: Similar to commissions, bonuses must be shown to be a regular and recurring part of your compensation. Lenders typically need to see a two-year history of receiving the bonus and will average the amount. A one-time signing bonus cannot be used as qualifying income.
If your new job has a lower base salary but high commission potential, you may need to wait 12 to 24 months before you can fully leverage your earning power to qualify for a mortgage.
Example: Alex moved to a new tech sales role with a $70,000 base salary and a commission plan. Although his projected on-target earnings are $140,000, the lender can only use the guaranteed $70,000 base salary for his mortgage application until he has a two-year history of earning commission at the new company.
Why is there a 2-year rule for self-employment, and are there exceptions?
For self-employed borrowers, the two-year rule is much stricter. Unlike a W2 employee with a set salary, a business owner's income can fluctuate significantly. Lenders require two full years of personal and business tax returns to calculate a stable monthly qualifying income.
They do this by averaging the net income (after expenses) from your tax returns (like a Schedule C or Form 1120-S) over the most recent 24-month period. This process gives them a conservative and reliable picture of your actual earnings over time.
Are there any exceptions to the two-year rule?
Yes, but they are limited. Some loan programs, including those backed by Fannie Mae, may allow for a 12-month exception. To qualify, you generally must:
- Have been self-employed in the same business for at least 12 months (but less than 24).
- Provide your most recent year of full personal and business tax returns.
- Demonstrate a strong history of prior success and income in the same field as a W2 employee.
- Have strong compensating factors, such as excellent credit (often 720+), a large down payment (20% or more), and significant cash reserves.
This exception is granted on a case-by-case basis and requires thorough documentation showing the business is stable and successful.
What documents will the lender require from my new employer?
To approve your loan based on a new job, the underwriter needs to build a solid paper trail. Be prepared to provide the following documentation promptly to avoid delays:
- A Complete, Signed Offer Letter: This is the most critical document. It must be on official company letterhead and clearly state your job title, your start date, your rate of pay (e.g., annual salary), and any guaranteed hours if you are paid hourly. It must be signed by both you and an authorized representative of the company.
- Your First Full Pay Stub: Your first pay stub from the new job confirms your employment has begun and shows your gross pay, deductions, and year-to-date earnings. Lenders typically require this to be dated within 30 days of the closing.
- Verification of Employment (VOE): Just before your loan closes, the lender will send a VOE form directly to your new employer’s HR department. This is a standard final check to confirm you are still actively employed under the terms stated in your offer letter. You will need to provide the lender with the correct contact person and information for this step.
Does a gap in employment automatically disqualify me from a loan?
No, a gap in your work history is not an automatic deal-breaker. However, the length and reason for the gap matter.
- Gaps Under 30 Days: A short gap between jobs is rarely an issue and often doesn't even require an explanation.
- Gaps Between 1 and 6 Months: For gaps lasting more than a month, you will need to provide a Letter of Explanation (LOX). Common and acceptable reasons include going back to school, maternity or paternity leave, caring for a sick family member, or a planned sabbatical. As long as you are now back to work in a stable position, this is usually acceptable.
- Gaps Over 6 Months: This is a more significant hurdle. If you have been out of the workforce for more than six months, most lenders will require you to be back at a new job for at least six consecutive months before they will consider your income for a mortgage. This demonstrates a return to stability and a consistent pattern of earnings.
How does switching to a completely new industry affect my application?
Changing careers can complicate your mortgage application because it resets your track record. An underwriter may view a move to a completely unrelated field as a risk, as there is no guarantee of success or income stability.
For example, a nurse with a decade of experience who takes a higher-paying nursing job is a predictable, low-risk borrower. However, if that same nurse quits to become a freelance photographer, the income is no longer considered stable until a new history is established (typically two years for self-employment).
If your new career is salaried and you can demonstrate that your previous skills are highly transferable, your case is stronger. But if the new role is commission-based or in a field known for high turnover, lenders may require you to be in the job for six to twelve months before they are comfortable moving forward.
What steps can I take to strengthen my application with a new job?
If you're starting a new job and want to buy a home, you can take several steps to make your loan application as strong as possible.
- Secure a Detailed Offer Letter: Make sure your offer letter is clear, comprehensive, and signed. It should explicitly state your guaranteed base salary.
- Boost Your Credit Score: A high credit score (740+) demonstrates financial responsibility and can help offset the perceived risk of your recent job change.
- Make a Larger Down Payment: Putting more money down reduces the lender's loan-to-value ratio and risk. A down payment of 20% or more eliminates the need for private mortgage insurance and makes you a much more attractive borrower.
- Build Your Cash Reserves: Lenders like to see that you have assets left over after closing. Having three to six months of mortgage payments in savings shows you can handle unexpected expenses without defaulting.
- Lower Your Debt-to-Income (DTI) Ratio: Before applying, pay down high-interest credit cards, personal loans, or auto loans. A lower DTI ratio gives you more borrowing power and financial flexibility.
- Work with an Experienced Mortgage Broker: A knowledgeable broker can navigate lender-specific guidelines and present your financial profile in the best possible light, finding a lender whose programs fit your exact situation.
Navigating a mortgage with new employment can feel complex, but it's often more straightforward than you think. If you have questions about your specific situation, a mortgage strategist can review your offer letter and pay structure to give you a clear path to approval.
Ready to see how your new job translates into a new home? Let's clarify your path to approval. Apply now to understand your mortgage options.
Author Bio
David Ghazaryan is the expert mortgage strategist and founder behind iQRATE Mortgages. With a mission to fund home loans that traditional banks won't touch, David specializes in helping clients with unique financial situations, including those navigating new employment or who are self-employed. He expertly crafts smart, strategic, and stress-free mortgages by leveraging a vast network of over 100 lenders to secure competitive rates, ensuring every client finds the right path to homeownership.
References
Fannie Mae Selling Guide: Stable Monthly Income
