Typically lenders prefer to deal with borrowers who have a record of steady employment. Because they receive consistent paychecks on a regular basis, borrowers with stable, full-time jobs are more likely to have the funds needed for their monthly mortgage payments. So what happens if you’re laid off while you’re in the process of securing a mortgage? What if you’re looking at leaving your current position and taking a job at another company? Will the need for a solid work history force you to choose between buying your dream house and accepting your dream job? Take a deep breath, and hang on to your resume. What effect does changing jobs after mortgage approval have on your path to homeownership?
Changing Jobs After Mortgage Approval
Change can be a good thing – but it isn’t always. Were you recently laid off? Did you decide to leave your current position without securing your next job? Or are you moving to a more lucrative position? Perhaps you’re taking a pay cut to pursue your passion?
The impact triggered by changing jobs after mortgage approval (but before closing) will depend on numerous factors, including your lender’s perspective, your financial situation, and the details of your new job. However, it’s worth noting that many people relocate for a new job and immediately purchase a home in their new area so that they won’t have to move twice. Clearly, a recent job change doesn’t rule out securing a mortgage. How will your lender view your job change? Understanding that and the potential fallout of a professional move can help you decide if right now is a good time to change jobs.
Income: Amount, Documentation, and Stability
As Mortgage Professor explains, lenders don’t just look at the amount of your income. While that’s obviously a major factor in your purchasing power, they also consider the quality of the documentation that you can offer demonstrating your income and its stability, which means its likelihood of continuing in a healthy vein in the future. Changing jobs in the middle of closing may create uncertainty about any of these aspects of the income calculation, especially stability. However, some types of job changes raise more red flags than others.
Is It a Good Change or a Bad One?
As The Mortgage Reports indicates, lenders are less likely to balk at continuing with your loan if the job change is viewed positively. Jobs that are in the same industry and come with a higher paycheck or represent a step to the next professional level will rarely cause much of a problem.
However, job changes that raise concerns about your income and your ability to afford your loan may jeopardize your approval or even bring the process to a screeching halt. For example, changing to a completely different industry or professional role makes it hard for your lender to judge your future success. In a similar manner, switching from salary to a payment structure featuring commissions or bonuses makes it tough to forecast the effect on your income. What about becoming a consultant or independent contractor? While you may appreciate the flexibility and freedom, your lender may worry about the lack of an employer offering a steady paycheck.
Tips for Changing Jobs During the Mortgage Process
Are you determined to make the leap? MyBankTracker suggests taking the following steps to smooth your path:
- Talk to your lender. Your lender is sure to find out about any job change. If you tell them, you have a chance to put a positive spin on your switch. However, if they find out that you’ve not only changed jobs but also kept quiet about it, it may raise red flags.
- Submit a letter of recommendation from your new employer. Your lender wants you to succeed professionally and repay your loan. Submitting a letter of recommendation from your new employer can offer reassurance that your job is secure and you are a valued member of your new team.
- Do your part. Be open and responsive. If your lender asks for additional information or documentation, move quickly to get it into their hands.
Are you ready to purchase a home? PrimeLending Twin Cities is your source for friendly, professional service. Our knowledgeable loan experts take a personal approach to help you secure the right loan product for your unique needs. Contact us today to discover the possibilities and discuss how our services can give you an advantage in the housing market.