If you are in the market to buy a home and suddenly get a great job offer, all is not lost. While it is true the mortgage lenders love to see stability with loan applicants, changing employers is not necessarily a death blow to your new home loan.
Provided that there are at least a few major components in place with the new job, you could still get approved for the new loan.
The Way Mortgage Lenders Interpret Employment
Unless you have some type of employment contract that includes a clear and definite end date, most jobs are considered to be ongoing.
This means that if you worked at your previous employer for 4 years and then took on a new job at a new company within the past 3 months, the lender assumes that you will continue to work there for the foreseeable future.
Lenders will normally look at the following items when determining a person’s work history and potential future work chances:
- The overall health of the industry in which you currently work – for example, if you work for a CD manufacturing company, the lender may be worried that the company will shut down since CDs are dying technology. However, if you work for a computer company building internal parts for the machine, that is seen as a healthy and growing industry.
- Job-specific qualifications as well as training – if you work as a nurse or an electrician, for example, the lender may ask for a copy of your current license that qualifies you to seek work in that profession. The lender may also ask if you are up to date on any Continuing Education Credits that are required to keep your license. This could be true for any profession that requires a license to work in that particular field.
- Your job history within the field – if you have been a licensed nurse for 10 years and changed jobs 4 times during that period, the lender will see that you have worked in the same industry with similar responsibilities for the entire time.
- Any period of unemployment – if you have gaps of months or even years where you were out of work, the lender will need a detailed explanation for the period.
- Existing pay for others in that line of work – using the same thing of working as a licensed nurse, the lender will compare your hourly wage to the average earnings for people with similar experience and see if the two numbers show any major difference.
If you have changed jobs within the last 24 months, you will need to be prepared to discuss the above items with the lender and may need to provide additional documents beyond your W-2’s and paystubs.
Job Changes that Can Be Approved by Lenders
There are certain types of job changes that are easily explained and typically can be approved by mortgage lenders for people looking to purchase a home.
Taking Next Step in Your Career
Lenders will usually have no problem approving someone’s job history if it is obvious that they have taken a better position, with better income, along the path of their career.
For example, using the nurse analogy from above, if a person was working as a licensed practical nurse, also called an LPN, and recently completed online college classes to become a Registered Nurse, also called an RN, then it would make sense for the person to accept a new job as an RN. All across the country, jobs for RN pay significantly more money.
Another example would be a person working as a commercial electrician for a large construction company. After working for a few years in the industry the person gets a job offer to be a supervisor of a team of electricians for a bigger construction firm. This would be an obvious elevation in the person’s career.
Taking on the Same Kind of Work for Better Pay
This is also a common occurrence across multiple industries. Many people are happy with the kind of work they do but would like to get slightly better pay and better benefits to do the same work.
Think of a junior attorney that has worked for a small firm of only 3 lawyers for the past 2 years getting a job offer from a multi-state law firm with 200 lawyers. The bigger firm can afford to pay the junior attorney a bigger salary for the same work.
The same would hold for a young accountant going to work for a larger firm or an electrician getting a better paying job at a bigger, more profitable company.
In these situations, if the person is working for an hourly wage, such as the electrician, the lender will likely use the new paystubs from the new job, and the old paystubs from the old job, to verify the rise in income.
For the other examples involving the accountant and the lawyer, the lender may ask to see a detailed job offer from the new firms that layout the higher pay plan and any other benefits that come from the job.
Job Changes that May Disqualify Your Loan Application
Just as there are certain scenarios that a lender will approve, there are also some scenarios that throw up a red flag and could get a loan application denied by the lender. Here are a few of the most common examples.
This is the most common example that derails a loan application. A person worked in a particular industry for a few years and decided it was not right for them, so they made a change.
Consider someone that worked as an electrician for the last 4 years and one day decided to sell new cars at a local car dealership. Those two jobs are very different, with different skill sets. The person may excel at the new job selling cars, or they may struggle and realize this was a bad move.
Changing from Hourly to Commission
This is another big warning to lenders. When a person changes from getting paid a set amount per hour to getting either full commission or a mix of hourly plus some commission, it makes the lender stop and diagnose the person’s income.
To use the commission earnings, the person will need a 2-year history to show their true wages. If the person just changed jobs within the last few months, they would not have the 2-year history they need to qualify for the loan.
Even if the person is on track to far and away exceed their prior hourly income, that is not enough to guarantee that the pattern will continue.
Changing from Employee to Contract Employee
Many industries lend themselves to having contact workers for temporary periods. Construction workers are usually a good example. A highly qualified electrician, or welder, or carpenter may find it is in their best interest to connect with a handful of construction firms and work for them on a contract basis.
However, if the person formerly worked as a W-2 employee and makes the change to a contract worker, they will likely not get approved for a mortgage loan.
Like the previous example, the lender will want to see a 2-year history of working under this new pay structure to approve the person for a loan.
In this instance, the person that works on a contract basis is self-employed. So, they will need to have tax returns showing their expenses for the year and see if they made any profit from the new work arrangement.
Final Thoughts On Getting A Mortgage With A New Job
As you can see, it is quite possible to get a home loan after a major job change. Provided that it is a good career move for the borrower, and it can be easily shown that the person is in a better financial position. If this is the case, then you have a strong chance of getting that new home loan.
Additional Home Buyer Resources:
If you’re a first time home buyer, there are a lot of mortgage programs to consider. Take a look at this post by Danny Margagliano to learn about the most popular first time home buyer programs offered to Florida residents.
Saving for a down payment is not the only thing you will need to save for. There are costs associated with getting a mortgage. Take a look at this post by Michelle Gibson to learn about common fees associated with buying a home!
Did you know that in order to get an FHA or VA loan, the lender may require some repairs to be made before being approved? Take a look at this post by Andy Kolodgie to learn what repairs the lender may want you to make.
In some cases to get that perfect home near your new job, may require you to do some minor or major renovations. If you’re looking for home improvement loan options, this post by Bill Gassett will teach you everything you need to know.
Any worthwhile goal will require some major effort. Winning a medal at the Olympics, building a strong marriage, and starting up a company that will last for years all take some sacrifice along with a detailed plan. Saving up a reasonable down payment for a home is similar in nature.
Comparing homes and finding the right one to match your needs is only part of the journey to becoming a homeowner. Another part of the journey is to research an area before buying a home. It is a good idea to spend some time considering these things and researching the area thoroughly before making a major decision like buying a home.
About the author: This article “Getting A Mortgage With A New Job” was written by Luke Skar of MadisonMortgageGuys.com. As the Social Media Strategist, his role is to provide original content for all of his social media profiles as well as generating new leads from his website.
MadisonMortgageGuys.com and team provide award-winning customer service to clients who need to purchase a home or refinance an existing mortgage.
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