Income and employment history weigh heavily on your home loan eligibility. If you’re wondering whether getting a new job affects buying a house, the short answer is yes, it does. That said, the details of your situation matter. Sometimes, a job change has a negative impact, but other times, it has little to no effect on your ability to qualify for a home loan. You don’t have to avoid changing jobs before or during the mortgage process — as long as you go about it the right way.
When Changing Jobs has Little Impact on Buying a House
Most job changes shouldn’t interfere with your ability to buy a house. Keep in mind that lenders like to see a job history that demonstrates increased pay and responsibility over time, stable work within the same industry, and jobs that match your qualifications and training. If any of the following scenarios apply, you should have no problem getting a mortgage with a new job.
You’ll Be Working in the Same Industry, Earning a Higher Income.
You have been employed at one company for several years. Now, a competing firm is recruiting you to work in a similar capacity for 20% more money.
This job change should not impact your mortgage application negatively. In fact, your lender should view the additional income as beneficial.
The New Job is a Next-Level Career Move
You have been a high school sports coach for over a decade. Now, you have the opportunity to coach a college team for the first time, with a five-year contract to get you started.
This job change is considered a career advancement. Since the contract exceeds the three-year minimum that lenders like to see, it should not affect your ability to qualify for a mortgage.
When Changing Jobs Could Make it Harder to Get a Mortgage
Lenders view some career changes as “unacceptable,” even if you’ll earn more. If any of the following applies, delay your job change until after closing on your new house.
You’re Switching from Salaried Pay to a Bonus or Commission Pay Structure.
While you may have the potential to earn more with an incentive-based pay structure, lenders view your future variable income as a greater risk. You may be denied a mortgage if you don’t have 12 to 24 months of work history under this pay structure.
Your Status Will Change from a W-2 Employee to a 1099 Self-Employed Contractor or Consultant
Once you lose the stability of being a W-2 employee, you’ll need to show 12 to 24 months of 1099 self-employment income to qualify for a mortgage with most lenders. This is true even if you do the same job for the same people while making more money than before.
The New Job Is in a Completely Different Industry
Changing jobs witIin the same industry is a sign of predictable income in the coming years. If you’re switching to a new field, your prior work history has no bearing on your potential future earnings. That’s why you should save any drastic career changes until after closing on your mortgage.
You’re Prone to “Job Hopping”
Frequent job changes don’t disqualify you from a home loan — as long as they make sense. If you go from a college intern to a full-time employee at the same company to a manager at a new firm, your career is advancing the way it should. However, if you can’t hold the same job for more than a few months at a time, you appear flighty and are less likely to be approved.
The New Job is Temporary Work
Lenders want your income to be reliable, stable, and likely to continue for the foreseeable future. Starting a new job with an upfront termination date of three years or less may disqualify you from a home loan.
What Lenders Want to Know About Your Job Change
Most mortgage applications request a two-year work history. If you’ve been in your current role for less than two years, your lender will want more information. Be prepared to explain:
- Why you changed jobs
- How often you change jobs
- Any periods of unemployment
- The health of your industry and employer
Just before closing, your lender will verify that your employment and income haven’t changed since you were pre-approved for a mortgage. For the best chance of defending your job change, proactively inform your lender about it, and be prepared to present the following:
- Offer letter or title change letter
- Written or verbal Verification of Employment (VOE) from the employer
- Most recent pay stub
Tips for Getting a Mortgage While Relocating
It’s common to buy a house while transitioning jobs, especially if you need to relocate before starting your new position. Mortgage lenders understand this. Still, you can make the process less stressful by using one of these strategies:
- Sell your home before purchasing a new one. Use the cash from the sale to help with your loan approval and to fund your down payment.
- Rent a place in your new town long enough to provide a lender with your first pay stub. Then, start house hunting.
- Purchase and close on a house in your new town before leaving your current job or selling your current house. Then, sell your property remotely after you relocate.
Estimate Your Mortgage Costs
The loan experts at Financial Concepts Mortgage can help you find some of the lowest rates on home loans in the nation, even if you recently changed jobs. If you’re looking at buying a home, the first step is estimating the monthly cost of a mortgage. Our calculator gives a simple estimate that covers the expected principle and interest payments based on the purchase price of the home, the down payment, term of the loan, and interest rate.
To work with a locally owned mortgage bank serving Oklahoma, Texas, Kansas, Arkansas, and Alabama, please contact us at (405) 722-5626, or start your application online if you’re ready to get started.