Lending guidelines are highly restrictive when qualifying borrowers employed through temp agencies. Per conventional conforming guidelines, temporary employment may be considered when the borrower works through an agency and has demonstrated this to be a stable form of income. The borrower's work history must be verified for two years and the borrower must have worked steadily as a temporary employee for a minimum of 24 months. Income is averaged over the two-year period, but not less than 24 months.
This is a very strict requirement and understandably so. The very nature of temporary employment suggests a lack of stability and reliability of income. Unfortunately, workers in the Bay Area's high tech sector (a significant and increasing percentage of our buyers) often initiate employment positions through temp agencies. High tech firms routinely source skilled workers such as software engineers through temp agencies as a means of thoroughly qualifying employees before offering them full time positions. So, when leaving a job to take a better position with a highly desirable employer such as Google, it is not uncommon to initiate work through a trial contract provided by a temp agency.
Borrowers who have worked for several Temp Agencies -a fairly routine practice -may still qualify as long as there have been no significant gaps in their employment history and they have been employed for 2 years. But many fall short of the mark and it is frustrating that, despite high earnings, they have difficulty qualifying for mortgage financing. Solutions can often be found, so don't despair if your employment is through a temp agency. With a 25 percent down payment, there are proprietary lenders who will consider Temp Agency employment of less than 2 years. They generally offer only 5-year fixed money, though I have seen one lender extend competitive 30-year fixed financing with just 20% down for a borrower who'd been employed through a Temp Agency for only 8 months.
The key to success is found through added measures taken to demonstrate stability in the borrower's employment history. These can include elaborated verifications of employment (VOEs), vendor contracts showing long-term employment, as well as letters from the vendors the borrower has been contracted out to. All of this takes time and you will want a firm lender commitment before making an offer. So, it is best to begin the process early.