An amazing job offer comes along very few times in one’s life. But what if it comes at a time when you are trying to qualify for a mortgage?
Oops. Bad timing. But it doesn’t have to stop you from getting a loan for your dream house in most circumstances. Some lending rules have eased a bit since the mortgage crisis, and now more people can be approved for a loan when changing jobs because of those more relaxed rulings and different mindsets.
Lenders used to require at least two years of steady employment in the same industry. That isn’t always the case anymore depending on the type of job, the income and future income.
However, employment and income are still considered big reasons why someone is approved for a mortgage or not. Having the same job for a long stretch of time shows your consistency and your ability to keep that job to pay a mortgage. Lenders still want stability and want to see that a steady income is coming in, especially when someone is first time homebuyer.
You could have gobs of money in your savings and still get turned down for a mortgage if your employment is iffy or sporadic. And remember that every lender has different rules.
Here are some things to do and know when it comes to possibly getting a loan after changing jobs:
Inform, Inform, Inform
If you are already in the process of getting a loan and you are planning to change jobs, you need to keep your lender up-to-date. Make sure you forward any information as quick as possible to them about how much money you’ll be making, and any bonuses or commissions you’ll be making at the new job. Don’t try to hide the new job from them until the last minute. Lenders call to verify employment before signing off on a loan.
Figure Out What You Can Afford
By using a mortgage payment calculator online with your new job’s salary, you can figure out how much house you can buy depending on whether you will have a low down payment or a higher down payment. Plus, you can see exactly what payments you will have hypothetically by plugging in different interest rates and different loans such as a 30 year fixed or an adjustable rate mortgage for five years.
An Offer Letter Can Help
It might be an unfamiliar phrase to most people – offer letter mortgage. But it’s becoming a little more used these days to help new college graduates and others get loans. An offer letter from a new employer can show the future income of new graduates or for employees relocating to a different job, a different company or coming back after a layoff.
Your new employer will need to send an official offer letter to your mortgage lender. This letter is being accepted as allowable income by some lenders to allow more people to become homeowners. It also needs to specify when you are starting the job, how much your salary will be, and it has to be signed by all parties involved – including yourself. Each lender will have their own rules such as you need to have enough cash on hand to pay several months of mortgage and property taxes.
For those of you who are enjoying the lifestyle of being your own boss, lenders get a little leery if you haven’t been doing the career for a few years. And they really grimace at roller coaster earnings where you have lopsided income from one month to another. To get past that, you need to have a lot of documentation of why your income is so unpredictable such as the fact that your business is seasonal. Having a substantial savings account to rely on during those down times could also help in the underwriting process.
With the self-employed, many use tax deductions and write offs from their income. They can write off everything from their office expenses such as ink and electronic equipment to a certain amount of rent and utilities depending on where they do their business. Sometimes, those write offs make their adjusted gross income look quite small to what you actually make.
So what do you do if you want to get a mortgage? If you have a partner or spouse, you can add them to the loan. Their income and assets could help you get the loan.
You can also qualify for a bigger mortgage by reducing or eliminating your other debt payments such as your car loan or student loans. This helps your debt-to-income ratio.
Finding Down-Payment Money
A first-time home buyer can find it hard to save up for a down payment especially if they are changing jobs. The bigger income will be coming, but lenders don’t necessarily see that from tax returns and bank statements. And that magical 20 percent down payment just isn’t reality for most, and it’s also a misconception that you need it. You can get a conventional loan with just 3 percent down or a government loan for 3.5 percent. There are also the VA and USDA loans with no money down.
Just remember to talk with your lender about which loan you will have a better chance of qualifying for while changing jobs.