Changing Jobs While Buying a House: Will It Hurt Your Loan?

Changing jobs while buying a house is usually fine if you stay in the same line of work at the same or higher pay and tell your lender before you accept. The moves that cause trouble are a switch to commission pay, to contract work or self-employment, to a new field, or to lower pay. That is because the lender must show your income is stable and likely to continue, and it checks your job again shortly before closing.

Changing jobs while buying a house: the quick answer

Your lender approved the loan based on the job and income in your application. If either one changes before closing, the lender has to review the file again. So call your loan officer before you give notice, and ideally before you sign the offer.

Here is how the common cases usually play out:

• Same field, same or higher base pay: usually little or no effect.
• Promotion with the same employer: usually fine.
• Salary to commission or bonus pay: the new variable pay may not count until it has a track record.
• W-2 job to contract work or self-employment: the new income usually cannot count until it shows up on a filed tax return.
• New field or a pay cut: the lender may need more documents, or the loan may no longer fit.

Timing matters as well. Under Fannie Mae’s rules, a salaried or hourly borrower’s final employment check is dated no more than 10 business days before the note date (the day you sign the loan documents), and the lender can also complete it after you sign.

When changing jobs while buying a house has little impact

Lenders focus on your income history more than on the name of your employer. Fannie Mae asks lenders to judge whether a borrower’s work history shows “a reliable pattern of employment over the most recent two years” (Selling Guide B3-3.2-02). Frequent job changes are fine under that section if your income stays consistent and predictable.

Same type of work at the same or higher pay

Say a salaried nurse takes a job at another hospital for a higher base salary. In that case, the lender can usually document the new income with an offer letter, a pay stub and a check with the new employer. Meanwhile, the history from the old job still counts.

A promotion or raise with your current employer

A promotion keeps the same employer and usually raises the pay, so it rarely causes a problem. Expect the lender to ask for a pay stub or employer letter showing the new pay.

When changing jobs while buying a house can hurt the loan

Trouble starts when the new job lowers your pay or makes it less predictable.

Moving from salary to commission or bonus pay

Variable pay needs a history before a lender can count it. Fannie Mae recommends a two-year history for bonus, commission and overtime income. It also accepts a shorter history, but no less than 12 months, when positive factors offset it (B3-3.3-02). FHA, by comparison, lets a lender count commission income after at least one year in the same or similar line of work (HUD Handbook 4000.1, II.A.4.c.ix).

Say a buyer earns a $60,000 salary and takes a sales job with a $40,000 base salary plus commission. Until the commission has a track record, the lender can usually count only the base pay. As a result, qualifying income drops from $5,000 a month to about $3,333. Our guide to income for a mortgage explains how lenders count each type of pay.

Becoming a contractor or self-employed

Going from a W-2 job to 1099 contract work or your own business is the change most likely to stop a purchase. Lenders document self-employment income with tax returns, and a new business has none yet.

• Fannie Mae generally wants two years of self-employment history. It can accept less if your latest signed tax returns show a full 12 months of income from the current business, plus prior income at the same or higher level in the same kind of work (B3-3.5-01).
• FHA wants at least two years. It can accept one to two years if you worked in the same or a related line of work for at least two years before (4000.1, II.A.4.c.x).

In practice, a buyer who goes out on their own mid-purchase usually has to wait until a full year of that income appears on a filed tax return. Read how long you must be self-employed to get a mortgage, then see how lenders calculate self-employed income.

Switching to a new field

A new line of work breaks the history that predicts your income. Under FHA rules, a borrower who has changed lines of work, or changed employers more than three times in 12 months, needs extra documentation, except in fields where working for many employers is normal (4000.1, II.A.4.c.xi(A)). That means transcripts of training or education for the new position, or records of steady increases in pay or benefits. Fannie Mae can accept a shorter history when positive factors offset it (B3-3.2-02), but expect more paperwork.

Taking a pay cut

If you tell the lender you are moving to lower pay, Fannie Mae requires the lender to qualify you on the lower amount (B3-3.1-01). That raises your debt-to-income ratio (DTI), the share of gross monthly income that goes to debt payments.

Say a buyer earns $7,000 a month before taxes. The new house payment would be $2,310, including principal, interest, property taxes, homeowners insurance and mortgage insurance. Other debts add $700 a month, so total debts of $3,010 equal 43% of income. At a new job paying $6,000 a month, the same debts equal 50.2%. Whether that still works depends on the loan program and the lender’s underwriting findings.

Leaving a gap between jobs

Fannie Mae says gaps in the most recent 12 months may look like unstable employment, so the lender must check that your current job is likely to continue (B3-3.2-02). For FHA loans, a gap of six months or more means you need six months in your current line of work and a two-year work history before the gap (4000.1, II.A.4.c.xi(B)). For this reason, avoid quitting before the new job starts.

What the lender checks, and when

Underwriting starts with your employment and income history. For FHA loans, the lender must verify your most recent two years of employment and income (HUD Handbook 4000.1, II.A.4.c.ii). However, neither FHA nor Fannie Mae requires two years at the same employer. Our guide to mortgage underwriting covers the rest of the review.

After that, the lender checks your job one more time near closing:

• Fannie Mae loans, salaried or hourly borrowers: the lender must complete a verbal verification of employment (VOE) no more than 10 business days before the note date. It can go back 15 business days when it relies on documents dated within that window that show your most recent pay period. Borrowers who qualify with self-employment income have up to 120 calendar days. The lender may also complete it after closing, up to the time it delivers the loan to Fannie Mae (B3-3.1-04).
• FHA loans: the lender must reverify employment within 10 days before the note date (4000.1, II.A.4.c.ii).

Despite the name, a verbal VOE can also be a written form or an electronic check through a verification service.

Common job changes and what to bring

Lenders can also add their own rules, called overlays, so ask your loan officer what your lender requires for a new job.

Changing jobs while buying a house with an offer letter

Fannie Mae lets a lender qualify you with a signed, non-contingent offer or contract for a job you have not started (B3-3.3-03). The offer must name you and the employer and state the position, the type and rate of pay, and the start date. Also, the employer cannot be a family member or an interested party to the transaction.

The rule has two paths:

• Pay stub before the loan is sold: the lender collects a pay stub from the new job before it delivers the loan to Fannie Mae, plus a verbal VOE.
• No pay stub yet: this path covers only a purchase of a one-unit home you will live in, using fixed base pay only. Your start date generally has to fall between 30 days before and 90 days after the note date.

The second path also requires extra reserves. That means six months of the full house payment, or enough to cover the debts in your DTI from closing to your start date, plus one month. Say the full payment is $2,310 a month. Six months of reserves would be $13,860, on top of any reserves the loan already requires.

These rules cover loans sold to Fannie Mae. Other loan types and lenders set their own, and some are stricter. Before you sign an offer, ask your loan officer which path your loan can use.

Changing jobs after closing

A job change after closing does not change the terms of a loan that has closed. The Fannie Mae and FHA rules covered here set no waiting period before you can switch jobs. If you used a down payment assistance or other special program, check its terms.

The catch is timing. Fannie Mae lets the lender complete the verbal VOE after closing, up to the time it delivers the loan (B3-3.1-04). Without that check, the loan cannot be sold to Fannie Mae. Consequently, a change before the lender has its final check can still cause a problem. Before you give notice, ask your loan officer whether that check is done, and make sure the new pay still covers your payment.

Relocating for work while buying a house

For a job in another city, the usual options are:

• Transfer with the same employer: often the simplest case, since the employer and income history stay the same.
• Buy with your offer letter: if the loan fits the Fannie Mae offer-letter rule above, you may close before your start date.
• Rent first: rent until you have pay stubs from the new job, then buy. This is slower, but the file is simpler.

If you already own a home, you can sell it first or keep it and rent out your house and buy another. If you keep it, the lender counts the old home’s payment in your DTI unless documented rent can offset it.

FAQ

Can you change jobs while buying a house?

Yes. A move in the same field at the same or higher pay usually has little effect. However, tell your lender before you accept, because the lender must verify the new job, usually just before closing.

Is changing jobs while buying a house a bad idea?

A lateral move or a raise is usually fine. On the other hand, a switch to commission pay, self-employment, a new field or lower pay can delay the loan or end the approval.

What happens if you change jobs while buying a house?

The lender reviews your file again and verifies the new job with your employer. If the new income is lower or less predictable, the loan may no longer qualify.

Will changing jobs affect my mortgage approval?

It can, because the approval rests on the job and income in your application. If the new job keeps or raises your stable income, the approval usually holds.

Do lenders verify employment after closing?

Some do. Fannie Mae lets the lender complete the verbal VOE after closing, up to the time it delivers the loan, and the loan cannot be sold to Fannie Mae without it.

Can you switch jobs right after closing on a house?

Yes. A job change after closing does not change your loan terms. Even so, wait until your loan officer confirms the final employment check is done.

Before you accept a new job offer

Changing jobs while buying a house works best when the lender hears about it first. Call your loan officer, describe the new pay and start date, and ask what documents the file will need. For a riskier change, ask whether waiting until after closing would protect the approval.

Then review the other pre-approval mistakes to avoid between now and closing.