👔 How Your Employment History Impacts Mortgage Approval in South Dakota

By Jeff Younger — Borrow Smart Mortgage Services

Introduction

When applying for a mortgage in South Dakota, your employment history plays a major role in determining whether you qualify — and what loan programs you’re eligible for. Lenders want to see stable, reliable income because it shows that you can make your monthly mortgage payments without financial strain.

As a local mortgage broker in Sioux Falls, I help buyers understand exactly what lenders look for and how to strengthen their profile before applying. Here’s what you need to know about employment history and mortgage approval.

1. Why Lenders Care About Employment History

Employment stability helps lenders predict your long-term ability to repay your loan.
They look for:

• Consistent income

• Steady job history

• Predictable pay structure

This gives lenders confidence that you can manage your mortgage payments even if financial conditions change.

2. The Standard Requirement: Two-Year Work History

Most loan programs — FHA, Conventional, VA, and USDA — prefer a two-year work history in the same field.
This doesn’t mean you must be with the same employer for two years, but they want to see continuous employment without unexplained gaps.

Accepted forms of history include:

• Full-time employment

• Part-time work (consistent hours for 2 years)

• Self-employment (2 years tax returns)

• Military service

• School or job training (can count toward history)

3. What Counts as a “Job Gap”?

A job gap is typically defined as a break of 30 days or more between jobs.
This doesn’t automatically disqualify you, but lenders will ask for an explanation.

Acceptable job gap reasons:

• Medical issues

• Family care

• Returning to school

• Career change within the same field

• Temporary layoffs

Providing a simple letter of explanation usually solves the issue.

4. Changing Jobs Before or During the Mortgage Process

Many buyers think changing jobs will ruin their chances — but that's not always true.

✔ When Changing Jobs is OK:

• Moving to a higher-paying role

• Switching employers but staying in the same field

• Starting a salaried position (W-2) with guaranteed income

✔ When It Can Hurt You:

• Moving from salary to commission

• Starting contract or 1099 work without two years history

• Changing industries completely without training or schooling

Pro Tip:

If you’re thinking about changing jobs before closing, talk to your lender first. One phone call can save your whole loan.

5. How Different Loan Types View Employment History

✔ FHA Loans

Flexible with job gaps and career changes as long as income is stable when applying.

✔ Conventional Loans (Fannie Mae/Freddie Mac)

Prefer two continuous years in the same field, but allow reasonable exceptions.

✔ VA Loans

Very flexible, especially for military transitions, recent service members, and federal employees.

✔ USDA Loans

Require consistent income for rural borrowers; job changes require documentation.

6. Self-Employment in South Dakota

If you own a business, lenders require:

• 2 years of tax returns

• Profit-and-loss statements (if needed)

• Proof your income is stable or improving

Sioux Falls has a large self-employed and contractor community, and we help many clients qualify even with fluctuating income.

7. How to Strengthen Your Employment Profile Before Applying

Here are strategies to improve your approval odds:

✔ Keep steady employment for 6–24 months

The longer you’re stable, the easier your approval.

✔ Avoid new commission-based jobs right before applying

Commission income usually needs two years of history.

✔ Maintain documentation

Pay stubs, W-2s, benefits letters, and employment contracts help speed up underwriting.

✔ Explain any job gaps clearly

A short, honest letter removes lender confusion.

8. South Dakota Employers and Local Lending Advantage

Local underwriting teams in South Dakota understand:

• Seasonal work

• Agricultural schedules

• Healthcare roles with multiple facilities

• Regional contractors and union jobs

This regional understanding makes it easier for local lenders and brokers to approve buyers who might not fit a “national lender” box.

Final Thoughts

Your employment history doesn’t have to be perfect to buy a home in South Dakota — but it must show stability and predictability. With the right documentation and guidance, most buyers are able to qualify even with job changes, gaps, or non-traditional income.

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