Can I get a mortgage if I just started a new job? This is a common question among people who are just starting their first job or looking for a career change. You might have heard that mortgage lenders suggest that switching jobs while applying for a home loan is a big NO.
But luckily for you, mortgage lenders offer flexibility when getting a mortgage with a new job. You just have to know the right process.
Landing your dream job can be exciting. But it can get quite challenging when you find a suitable home at the same time. Juggling a new job and your soon-to-be new home can be complex but fret not, we have got your back.
In this guide, we will go through the steps you need to take to get a home loan with a new job or career change to keep your homeownership dream alive.
Let’s get started.
Can You Get a Mortgage with a New Job?
First and foremost, it is important to understand how mortgage lenders look at employment and how it can affect your home loan application. They look at the borrower’s employment details like job title, likelihood of their employment to continue, and even the length of employment.
Typically, mortgage lenders require you to present a 2-year history in your current job position. However, it is also possible to qualify for a mortgage and bypass the 2-year history check if you are transferring to a new role.
It is important to discuss your job situation with the mortgage lender and provide written and verbal proof to maximize your chances of approval.
Can You Get a Mortgage If There Are Changes to Your Pay Structure?
It is possible to get a mortgage even if there is a change in your pay structure, but it may be harder to qualify. For instance, if you went from salary-based pay to commission-based income, the mortgage lender must verify that the changes to the pay structure will not affect your ability to make mortgage payments.
To help verify this, the lender may require a letter from the employer detailing the reasons for the change in pay structure. Additionally, you may also be required to submit pay slips to show that the change doesn’t affect your overall income.
Documents Required to Get a Mortgage With a New Job
If you want to get a mortgage with a new job, there will be some extra steps to take care of. Experts suggest that it is best to wait a while after receiving approval to change jobs, but sometimes you just can’t help it. Here are some documents that you will be required to present to the mortgage lender in case of a job change.
Required Documents
Offer Letter: If you just got a new job, present the offer letter to the mortgage lender. If you got a promotion or title change, present a title change letter.
Verification of Employment(VOE): Much like the offer letter, the lender also requires a physical or verbal verification of employment from your new employer.
Recent Pay Slips: Submit your most recent pay slips to show proof of current employment.
Additional Mortgage Qualification Factors
While employment is a crucial factor for qualifying, it isn’t the only one. Here are some other factors that mortgage lenders take into consideration when evaluating your home loan application-
- Good Credit Score
- Low Debt-to-income Ratio
- Cash Savings
- Investments and Assets
- Bonus or Commissions
- Down Payment Percentage
5 Steps to Getting a Mortgage With a New Job
While it may be hard to qualify for a mortgage with a new job, understanding the steps will help you streamline the process and achieve your dream of owning a home.
Learn the Rules of Getting a Mortgage With a New Job
As mentioned above, lenders require a 2-year work history at the same job as it shows you have a stable income. Consistent long-term employment is also a sign that you will be able to make your monthly payments.
Although it is hard, it is not impossible to qualify for a home loan with a new job. Lenders just need extra reassurance that you will be able to repay the loan.
Additionally, you might also have to face stricter guidelines than someone who has been at the same employer for several years.
- Your employment starts within 60 to 90 days of approval- This information should be reflected in your offer letter.
- Your job offer has been accepted- Keep in mind that lenders require a signed and dated contract. An unsigned offer letter is not acceptable.
- You meet all the conditions to start the new job- Lenders verify that your position is not based on any training period or certifications to start.
- You recently graduated- You can also use your college degrees instead of job experience to show that you have the skills to work at your new job.
- You completed trade school training- Additional training or certification is viewed as a positive and can increase your chances of approval.
- You recently retired from active-duty military service- Veterans who can show that their new job is related to military services may be approved for a loan guaranteed by the U.S. Department of Veterans Affairs.
- You have cash savings to cover payments until your joining date- If you have enough cash savings to cover your payments until your joining date, lenders see it as a positive.
- You are buying a single-family first home- This is an exception and will not apply to second homes, multifamily homes, or investment property.
- You qualify with your fixed base income- You can not show potential future performance bonuses, stock opinions, and promotions until you have a two-year history of receiving them.
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Produce Documents to Verify Your New Job and Income
If you are trying to get a mortgage with a new job, your mortgage lender will ask for extra paperwork to verify your ability to make mortgage payments.
You should also get a contact name and number of your employer in case your lender needs to confirm anything related to your new job.
Require Mortgage Documents
- Signed and dated offer letter
- Copies of a college degree
- Copies of trade school certifications or training
- Military service paperwork detailing your specialities(if any)
- Two months of bank statements
- Purchase contract for a one-unit primary residence(does not apply for second home)
- Letter explaining a career or title change.
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What If You Are Self-Employed?
Self-employment is becoming increasingly popular among the younger generation. The ability to set your own work hours and get paid daily instead of weekly or monthly is something individuals love. However, in this type of job, you are usually an independent contractor, which makes you a self-employed borrower.
In this case, you will have to provide 1 or 2 years’ worth of tax returns for the lender to determine your average income and whether you qualify for a home loan or not.
Don’t Switch From Salaried to Commission Based Jobs
Even if you are earning more than before, switching from a salaried job to a commission-based job is not a good sign in the eyes of a mortgage lender.
Since your income isn’t guaranteed, lenders will require proof of your commission earnings, which can make the whole approval process more complex.
To show proof, you will have to submit two years’ worth of W-2s from your employer. However, if you have a substantial down payment or an excellent credit score, you may be exempted and be required to show only 12 months of commissioned income.
Reserve Extra Cash Savings for Mortgage
If you want to be approved for a mortgage without receiving your first paycheck, lenders will ask you to prove that you have cash savings to cover mortgage payments between the time you close the loan and receive your first paycheck. However, it isn’t so simple.
The required amount for lenders is more than one or two months of standard mortgage payments. Instead, your cash savings must cover your monthly mortgage payments plus your monthly expenses included in your debt-to-income ratio. This includes your student loans, credit card payments, and other essential monthly expenses.
Final Words
Changing jobs during or shortly before initiating the mortgage process doesn’t mean you can’t get approved, it just complicates the process. In most cases, it isn’t much of a problem, provided you have the required documents a mortgage lender requires to gauge if you can get a mortgage with a new job.
However, the problem arises if your new pay grade falls below what you need to qualify for a home loan. In this case, you might need to explore other options like delaying your purchase or buying a cheaper home. Additionally, if your new job is commission-based, you will have to submit two year’s worth of W-2s from your employer to qualify.
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Frequently Asked Questions(FAQs)
Ans. Generally, switching careers shouldn’t be much of a problem. However, you can be disqualified for your home loan application if your earnings decline, and you may have trouble being approved. Moreover, if you are constantly switching careers or sectors without any pay increase, the lender will take a more in-depth look at your mortgage qualifications.
Ans. No, new self-employed borrowers must prove their income by showing one or two years’ worth of tax returns.
Ans Yes, you can receive a home loan even if you are unemployed. However, there will be extra steps you need to take to be approved for a home loan. You must show documents of other consistent source of income like child support, alimony payments, or retal property income, etc. Moreover, you can also show liquid assets as a source of income.
