Another common issue is that the borrower has only been at his or her current job for a year or two. Quality lenders like to see at least two years of straight employment at one institution. That makes the lender feel secure that the borrower has a job and won’t be leaving any time soon. However, lenders are not going to automatically refuse a loan if a borrower has a history of changing jobs every few years. A smart lender will look at the kinds of jobs the person has had. For example, if a loan applicant is a restaurant manager and has worked at five different restaurants in the past 10 years, that’s likely to be OK for the lender. The reason for this is that the jobs are all in one industry, which shows that the borrower has an established career. If an applicant has had five jobs in 10 years, and each one is in a completely different industry, that will be a problem. That shows the applicant doesn’t have an established career and poses a risk.
QUALITY OF INCOME
As you would expect, the number one quality lenders are looking for in a potential borrower is whether or not they are employed. W-2 income — where an employer pays an official employee a regular paycheck with taxes taken out — is the best type of income, because it shows job security. However, there are other types of income of varying quality. For example, there’s child support income. If someone is living off child support payments (or the bulk of their income is via child support), the lender will want to see court documentation that proves that income will still be coming for at least another three years. If the child support payments will stop soon after the loan would be signed, it’s likely the lender would squash the deal (unless the borrower could prove where new income sources
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