The short answer is changing jobs can affect your loan approval.
From your mortgage lender’s perspective, your employment history and income are paramount to your ability to make your payments.
That said, the details of your situation matter. For example, if you’re moving from one position to another with equal or higher income, and you are able to provide documentation of your income history, then you may be able to avoid disrupting your loan approval process.
But before accepting a new job — or if you’ve recently changed positions — you should consider the ways it may impact your home loan process.
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Can you change jobs while buying a house?
Sometimes a new employment opportunity may come along while you are in the midst of the home buying process.
If you plan to change jobs during the mortgage application process, it is important to tell your lender as early on as possible. Even once your loan has been approved, be cautious about changing employment. Many lenders will do a final check to verify your employment and income haven’t changed since your final loan approval was issued.
Changing jobs during your mortgage application does not always affect your ability to qualify for a mortgage loan. Some changes, though, can be more impactful than others.
When a job change would have no impact
If you’re an hourly or salaried employee who does not earn additional income from commissions, bonuses or over-time, and if you’re changing to a similar job with similarly structured pay with a new employer, you may not have any home buying challenges.
When a job change would have a negative impact
If your job change makes your income less predictable, this could be a bigger red flag for your loan officer. Here are some scenarios that could impact your mortgage approval process.
Moving from a salaried position to one based on commissions or bonuses
Commissioned, bonus and overtime income is generally going to be averaged over the last 24 months. So if you don’t have a two-year history earning this type of pay, it will likely be hard to qualify for a loan. Changing to this type of pay structure could cause headaches and possibly even derail your mortgage approval.
Even if you moved from a position with a similar income structure, it may be hard to verify if it’s not a similar position.
Becoming a contract employee or self-employed
If you are thinking about going from an employee who receives W-2s to an independent contractor or starting your own business, don’t do it right before (or during) your mortgage process. Although there are some loan programs that allow for just one year of self-employment history, most lenders want to see a two-year history of your finances if you’re self-employed.
Further, when you go from being a W-2 employee to a 1099 employee, an underwriter cannot properly calculate your income without your tax returns. This means your mortgage approval will need to be delayed until after you file your taxes and you will need to pay any taxes owed before you can use your new self-employment income.
Moving to a completely different industry or position
Lenders are looking for indications that predict steady future income. If you’re changing fields, your prior work history will no longer be a reliable predictor of future income. Lenders tend to prefer borrowers with at least two years of experience in their current field, so save the career change for after closing.
Frequent lateral job moves
Job changes that suggest career progression, such as from intern to full-time employee to manager at the same company, won’t raise eyebrows. But applicants with a history of steady employment and frequent job changes that don’t indicate professional growth may appear flighty.
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What documentation will I need to provide?
If you think you may have a change of employment during your mortgage process, you should proactively inform your lender and be prepared to provide supporting documentation. They will typically request:
- An offer letter
- A title change letter
- Most recent pay stub
- Written or verbal verification of employment (VOE) from employer
Can I get a mortgage if I just changed jobs?
Lenders want to see that you have income that is reliable, stable and likely to continue for at least three years. Unless your current job has a termination date, most lenders will consider your current employment to be permanent and ongoing.
How long do I have to be in a job to get a mortgage?
Standard mortgage applications request a two-year work history. If you’ve been in your role for two years, then your mortgage process won’t be impacted. But if you’ve been there for less than two years, your lender will consider the following:
- Your qualifications and training
- The health of your industry and company
- How often you change jobs
- Extended periods of unemployment
- Increases in pay and responsibility over time
- Work history within the same field
You should be prepared to explain to your lender why you changed jobs, and to list your qualifications for the new position.
How can I get a mortgage when I’m relocating?
If you’re relocating for a new job, you’ll need to secure housing before your move. The least stressful solution is probably renting for long enough to provide a lender with your first pay stub. As long as your new job is in the same line of work and a comparable — or better — salary, you shouldn’t experience delays in finding a loan.
Another option is to purchase and close on a new house in the new place before you leave your current job. Remember that lenders confirm employment during the loan application and again just prior to closing, so you must wait to give notice until after closing.
If you’re already a homeowner and need to sell your current home while shopping for another and possibly renting as well, the cost can be demanding. If you sell your home before purchasing a new one, then cash from closing can help with your new down payment and loan approval.
Alternatively, if you can afford to pay two mortgages temporarily, you could purchase a new home in your new location, move into it and sell the property remotely. It may even be possible to rent your old home.
You can still get a mortgage if you’ve switched jobs
Your employment and income are two of the most important factors underwriters consider when approving your mortgage application.
Fortunately, switching jobs doesn’t mean you can’t get a mortgage as long as you approach it the right way.
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FAQ
Can you change jobs while buying a house?
You can change jobs while buying a house. But the change in your employment situation could impact your loan finalization.
A mortgage lender will consider your employment and income as two of the most vital parts of your loan application. Some job changes could make getting a mortgage more difficult. But other changes could make securing a mortgage easier.
For example, if you start a completely new career, take a pay cut, or become an independent contractor, then a job change could impact the finalization of your loan. But if you receive a promotion in the loan application process, that should not negatively impact your mortgage application.
Is it bad to change jobs while buying a house?
It is not necessarily bad to change jobs while buying a house. Although it may be easier to wait until after closing to make a change, sometimes the right career opportunity presents itself in the midst of buying a house.
If you change jobs while buying a house, you’ll have to notify the lender and provide details about the switch. In some cases, the new job could be a boon to your loan application. But if you take a pay cut, switch fields, or start your own business, the switch could jeopardize your closing.
For example, a pay cut would impact your debt-to-income ratio (DTI). With a higher DTI, a mortgage lender may decide that homeownership is not the right move for your finances.
What happens if you change jobs while buying a house?
If you change jobs while buying a house, you’ll need to provide extensive documentation to the lender. You will have to inform them of the job change and provide new salary details. Plus, the lender may ask why you decide to make this career shift.
After providing this information, the lender will likely reevaluate your application. If the job change offered a higher and stable salary, then the lender may proceed as if nothing has changed. But if you are earning less or have a less stable income, the lender may decide to cancel the closing.
Will changing my job affect my approval for a mortgage?
Changing jobs can impact your approval chances for a mortgage. The reason is that a mortgage lender will consider your income and employment history carefully when applying for a mortgage.
If you make any career changes to these factors in the months leading up to your mortgage application, that can impact your approval possibilities. Even if you already have a pre-approval in hand, a lender will need to review your qualifications again whether you are a first-time homebuyer or undergoing a refinance for your existing mortgage.
Do lenders verify employment after closing?
Typically, a mortgage lender will conduct a verification of employment in the days leading up to closing. But after closing, most lenders will not reverify your employment.
When you’ve already closed on your mortgage, you’ll be responsible for making regular monthly payments. If you are planning to make changes to your employment, make sure that you can still comfortably afford your new mortgage payment before making the leap.
Can I switch jobs after closing on a house?
After you’ve closed on a house, the lender will expect you to make regular on-time monthly payments. Since the lender is more concerned with your payments than your employment status, you can switch jobs after closing without jeopardizing the loan. However, take some time to confirm that you can afford the new mortgage payment before moving to a new job.
The bottom line
It’s possible to change jobs while you’re in the process of buying a home but it can complicate or slow the process. To help the process go as smoothly and quickly as possible, it may be best to wait until you’ve closed on your mortgage before switching jobs.
Check today’s mortgage rates (Nov 22nd, 2024)
