Fannie Mae and FHA both look at the most recent two years of employment; FHA has a specific test for gaps of six months or more, while Fannie Mae requires careful analysis of gaps in the most recent 12 months. Under FHA, current income can be used after a gap of six months or more if the borrower has worked in the current line of work for at least six months at case number assignment and had a two-year work history before the absence. Fannie Mae's fixed limit applies only to borrowers qualifying with income from more than one job at the same time: when the history includes different employers, no gap may exceed one month in the most recent 12-month period, unless the employment is seasonal.
Fannie Mae (conventional)
- Lenders must evaluate whether the work history reflects a reliable pattern of employment over the most recent two years; a shorter history may be eligible if positive factors reasonably offset it. Fannie Mae B3-3.2-02
- Gaps during the most recent 12 months may make employment appear unstable, so the lender must carefully analyze current employment to ensure it is likely to continue. Fannie Mae B3-3.2-02
- For borrowers qualifying with income from multiple employment sources at the same time: when the employment history includes different employers, no gap in employment may exceed one month in the most recent 12-month period, unless the employment is considered seasonal income. Fannie Mae B3-3.2-02
- If the employer confirms the borrower is currently on temporary leave, the lender must consider the borrower employed; mandatory leave initiated by the employer, such as a furlough or layoff, is not temporary leave. Fannie Mae B3-3.3-09
FHA
- The lender must verify the most recent two years of employment and income; evidence of school or military enrollment during those two years can be used to verify the history. FHA 4000.1 II.A.4.c.ii(C)
- For a gap of six months or more (an extended absence), current income may be used if the borrower has worked in the current line of work for at least six months at case number assignment and had a two-year work history before the absence. FHA 4000.1 II.A.4.c.xi(B)
- The manual underwriting section applies the same extended-absence standard. FHA 4000.1 II.A.5.b.xi(B)
- If the borrower changed employers more than three times in the previous 12 months, or changed lines of work, the lender must take additional steps to document income stability, using training or education transcripts or evidence of continual increases in income or benefits. FHA 4000.1 II.A.4.c.xi(A)
- For a temporary reduction of income due to short-term disability or similar temporary leave, current income may be used if the borrower intends to return to work, has the right to return, and qualifies after taking the reduction into account. FHA 4000.1 II.A.4.c.xi(C)
Sources
- Fannie Mae Selling Guide, September 2, 2026 version: B3-3.2-02, Standards for Employment-Related Income (Employment) (p. 313); B3-3.2-02, Standards for Employment-Related Income (Employment Gaps) (p. 314); B3-3.2-02, Standards for Employment-Related Income (Multiple Jobs) (p. 314); B3-3.3-09, Temporary Leave Income (p. 330, 331)
- FHA Single Family Housing Policy Handbook 4000.1, August 12, 2026 version: II.A.4.c.ii(C), Employment Related Income (TOTAL): Required Documentation (p. 224); II.A.4.c.ii(C)(3), Past Employment Documentation (TOTAL) (p. 225); II.A.4.c.xi(B), Addressing Gaps in Employment (TOTAL) (p. 232); II.A.5.b.xi(B), Addressing Gaps in Employment (Manual) (p. 311); II.A.4.c.xi(A), Frequent Changes in Employment (TOTAL) (p. 231); II.A.4.c.xi(C), Addressing Temporary Reduction in Income (TOTAL) (p. 232)
Agency guides set the baseline; individual lenders can add stricter overlays. Sources are the guideline versions in Zeitro Strata as of October 29, 2026.