If you’re considering buying a home in Schertz, Texas, and you have a low credit score, you might be curious about how your employment history affects mortgage approval. At New Horizons Lending, we totally understand that getting a mortgage can seem overwhelming, but here's the wonderful news: your employment history is a key factor taken into account when assessing your loan application.

In Schertz, a rapidly growing community near San Antonio, many homebuyers face challenges with credit scores that aren’t ideal. Fortunately, a holistic approach to the mortgage approval process, including your employment history, can help offset a lower credit score and improve your chances of approval. Let’s dive into how employment history can influence your mortgage application.

Why Employment History Matters for Mortgage Approval

While your credit score offers a snapshot of your financial past, your employment history helps show your financial stability moving forward. Factors typically look for:

● Length of Employment: Stability in your job history suggests that you are more likely to continue earning a steady income, making you a less risky borrower. It’s often preferred that the applicants have at least two years in the same job or industry, especially if you’re in a consistent line of work. A long tenure with an employer can strengthen your application.

● Consistency of Income: Show that you have a reliable source of income to repay the mortgage. If you have a history of stable employment with consistent earnings, it gives lenders confidence that you can manage monthly payments.

● Income Type: If you're self-employed or have irregular income, you may need to provide more documentation to prove that you can meet your mortgage obligations. Freelancers and gig workers can still qualify for a mortgage, but you might need to show tax returns and bank statements for the past two years.

How a Low Credit Score Affects Mortgage Approval

A low credit score might seem like a hurdle when qualifying for traditional mortgage loans, but it doesn't have to be a dead end! There’s much flexibility available, especially if you have a solid employment history that demonstrates your ability to earn a stable income consistently. If your credit score is on the lower side, don't worry! It’s a great idea to look into government-backed loans, as they usually offer more lenient approval criteria.

Government-Backed Loans for Low Credit Scores in Schertz, Texas

● FHA Loans: FHA loans are an excellent choice. They typically allow credit scores as low as 580 with a 3.5% down payment. A steady job history can help offset a lower credit score when applying for an FHA loan.

● VA Loans: VA loans offer no down paymentand don’t have strict credit score requirements, making them ideal for homebuyers in Schertz with low credit scores. Your steady employment history and military service can play a vital role in securing this type of loan.

● USDA Loans: For Schertz residents in rural or suburban areas, USDA loans offer 100%financing. These loans are designed for low- to moderate-income buyers and have flexible credit requirements. A long history of stable employment can help strengthen your USDA loan application.

How to Improve Your Employment History for Mortgage Approval

If you're concerned about how your employment history might affect your mortgage application, here are a few steps you can take:

● Stay in Your Current Job: Stability is key. If possible, try to avoid job-hopping before applying for a mortgage.

● Document Any Gaps: If you’ve had any employment gaps, be prepared to explain them. Whether you were raising a family, pursuing education, or switching careers, showing that the gap was temporary and that you’ve since regained financial stability can work in your favor.

● Consider Government Programs: As mentioned, government-backed loans like FHA,VA, and USDA loans offer flexibility when it comes to credit score and income history. These programs are particularly helpful if your credit score is low but you have a reliable job history.