On a mortgage application, what's the logic - and is there any evidence for it - regarding longer length of service being 'better' for an applicant?

I can understand if you've only been in the job a week, sure.

But having been at a company for 5 years just says that the company was hiring 5 years ago. "Only" 3-6 months service means that the company was hiring quite recently and so is in a growth phase, or at least not a recruitment freeze? Which would seem to be a good thing statistically for outlook of that job.

Edit: this isn't about a specific lender's policy, but the general recommendation about that.

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    Don't really have a full answer, but "3-6 months service means that the company was hiring quite recently and so is in a growth phase" is not necessarily true - company could have high turnover. My wife worked at a company with average length of about 1.5 years - she only made it about 8 months. – BlakeP Jan 5 '16 at 19:04
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    Are you asking specifically for the US? Most European countries don't have at-will employment but a probation period after which firing someone becomes more difficult or time-consuming. A European employee who just completed his X-month probation period has much more job security than a US employee who's been on the job for years. – Lilienthal Jan 6 '16 at 14:18
  • @Lilienthal UK based but I understand that it also applies in the US and probably others. It seems to be a fairly standard criteria in 'western' countries.... – user36305 Jan 6 '16 at 20:42

In a word: risk.

Mortgage lenders are concerned about risk. Sure, the mortgage is backed by the value of the home, but foreclosing on a house is expensive, time-consuming, and hurts the lender's bottom line.

So the lender wants to make very sure that the mortgage holder will be able to make his monthly payments. Someone who has had a steady job for the past x years is less risky than someone who just got a new job.

It comes down to the statistics. The lender doesn't care if the employer's company is growing, or the employee has any number of reasons why their job outlook is good. Lenders use numbers and tables and statistics to calculate their risk when someone wants to borrow their money. They've found length of employment to be a useful number, so it factors into their decisions and interest rates.

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    Worth noting that time in previous positions is also taken into account - long tenure indicates that you are relatively stable and are not the kind of employee that gets fired. – Dale M Jan 6 '16 at 2:13
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    A lot of probationary periods in the UK are 3-6 months (depending on the industry) and an employee can be terminated at any point in that time for seemingly no reason. Outside this period it's a bit more complex to get rid of someone, so they are seen as having some job security. – gabe3886 Jan 6 '16 at 11:23
  • Is there any significance really to a "probation" period? In the UK anyone can be fired for any reason (other than discriminatory reasons) in the first 2 years pretty much.. – user36305 Jan 6 '16 at 22:50

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