The Path to Homeownership: Employment Requirements for A Mortgage

If you're beginning the journey of buying your first home, it is critical to have an understanding of employment requirements to be eligible for a mortgage. We want to make sure you feel confident and informed, so let's dive into the basics of what it takes to secure a mortgage, whether it's a standard FHA loan or one through TruePath Mortgage.

Understanding General Employment Requirements

Stable Employment

To qualify for a mortgage, lenders typically look for stable employment. This means having a steady income source that assures them you can make your monthly payments. Most lenders look for evidence of a two-year work history. Requirements may vary if you are self-employed or a small business owner. 

Income Verification

Lenders will also request proof of your income. This can include recent pay stubs, tax returns, or employment verification letters. It's all about showing that you have the means to repay the loan and maintain your new home.

Credit History

While not directly tied to employment, your credit history is a significant factor in mortgage approval. Paying bills on time and managing debts responsibly contribute to a positive credit score, making lenders more confident in your ability to handle a mortgage.

Understanding FHA Requirements: Minimum Credit Scores & Down Payments

For those considering a standard FHA loan, here are a few additional points to keep in mind. FHA loans often have more lenient credit score requirements compared to conventional mortgages.

FHA loans typically require a lower down payment, making homeownership more accessible. FHA loans enable individuals with a credit score of 580 or higher to buy a home with a down payment as low as 3.5% of the purchase price. For those with credit scores ranging from 500 to 579, a minimum down payment of 10% is required to secure the loan. The down payment amount may vary based on your credit score and other factors, so it's essential to discuss this with your mortgage advisor. 

Understanding TruePath Mortgage 

TruePath Mortgage, designed by Twin Cities Habitat for Humanity, offers a unique opportunity for first-time homebuyers. These programs consider your specific financial situation and may include down payment assistance or favorable interest rates.

To qualify for TruePath, it's preferable to have a credit score of at least 620. However, if your score falls between 580 and 620 or if you don't have a credit history, you can still apply by providing alternative credit documentation. You'll need around $6,300 in savings and ensure that your total monthly debt payments don't exceed 13% of your gross monthly income. Any outstanding collections should be limited to a maximum of $1,000, or $3,000 if they're medical collections.

For employment, you'll need to have been in your current job for at least six months, with a continuous two-year employment history for full-time jobs. If you're part-time or self-employed, you should have been in your current position for at least two years.

With a fixed interest rate of 5.75% and an Annual Percentage Rate (APR) of 5.8095%, TruePath offers stability over a 30-year term. Your monthly housing payment is designed to be affordable, set at no more than 30% of your gross income. The best part? There's no need for mortgage insurance. You can secure up to 96.5% of your home's value through this mortgage, with options for down payment and affordability assistance based on your income and eligibility.

Habitat for Humanity is committed to your success. TruePath Mortgage offers financial education courses, ensuring you feel confident and informed about managing your mortgage and home expenses. Whether you're exploring a standard FHA loan or TruePath Mortgage by Habitat, remember that Twin Cities Habitat for Humanity is here to support you. We believe in your dream of homeownership, and we're dedicated to making it a reality. If you have any questions, our team is ready to guide you every step of the way. Welcome to the path of homeownership!