The short answer is changing jobs can affect your loan approval.
From your 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 one 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 — then you should consider the ways it may impact your mortgage process.
Can you change jobs while buying a house?
Sometimes a new employment opportunity may come along while you are in the process of buying or refinancing.
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 hasn’t changed since your final loan approval was issued.
Changing jobs during the process 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, you may not have any challenges.
When a job change would have a negative impact
You will seem like a greater lending risk if your job change makes your income less predictable. 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. Changing to this type of pay structure could cause headaches and possibly even derail your mortgage approval.
Becoming a contract employee or self-employed. If you are thinking about going from a W-2’d employee to an independent contractor or starting your own business – don’t do it. 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 being self-employed.
Further, when you go from being a W-2’d employee to 1099’d, 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 experience in their current field, so save the career save 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 lenders are seeking applicants with a history of steady and employment and frequent job changes that don’t indicate professional growth may appear flight.
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 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, then 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 do 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 industry and a comparable — or better — salary, you shouldn’t experience delays finding a loan.
Another option is to purchase and close on a 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 too, 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 help with loan approval. Alternately, if you can afford to pay two mortgages temporarily, you could purchase a 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.