Changing jobs is a natural part of a long and eventful career. But if you're trying to impress a mortgage lender, you need to know some of the basics when it comes to employment.
First, mortgage companies typically want to see working applicants who have been in the same field at least two years. The reason: A solid two-year work history is a good indicator of one's financial stability. Here are some common employment scenarios and how they may play out with lenders:
- In college, you studied a particular field and now have a job in that field. This scenario would be acceptable in nearly every mortgage loan program as long as there's documentation.
- You've just changed jobs within the same field but are earning less than before. This scenario would be acceptable, and the lender would use your current income to see if you qualify for loans.
- You've just changed jobs -- and career field. This scenario would be questionable, and your ability to qualify would depend on how much the lender was willing to help you.
- Your new job situation is temporary. This income would be averaged as if you were a salaried employee who switched to impermanent income.
What paperwork you need
In most cases, other than college, lenders want to see documentation on your new job and income. Paperwork for a new job should be highly detailed and include your new title, new role and salary. More specifically, mortgage companies expect paperwork with your:
- Start date
- An offer letter with compensation
- A pay stub
- Verbal confirmation of your employment, which will come later
All these are critical, especially if the job you took is brand-new and you have no previous history of earning a particular type of income, i.e., going from a salary to an hourly wage or receiving a raise. You should be able to get pre-approved as long as the job has a start date; the key is providing the items with timely documentation.
The top mortgage programs, including conventional, Federal Housing Administration and Jumbo, all follow the same requirements for using brand-new job income for applicants. It doesn't matter if you're buying a home for the first time or refinancing a home you own.
But if you're already in the process of applying for a mortgage, it goes without saying you generally shouldn't change jobs in the middle of the process. If you must or know a possible change to your financial picture is in the works, handle that first, and then you can begin the mortgage application process.
Changing jobs in the middle of the process won't just delay things but can potentially impede your ability to secure financing. Another smart alternative would be to secure mortgage loan financing then make a job change when you have a low-rate, low-cost home loan you can handle -- despite any changes to your income.
Remember, too, a good credit score can help you qualify for the best terms and conditions on a mortgage. You can see where you currently stand by viewing your two credit scores for free, updated each month.
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