A reader asked us recently how much impact an unanticipated job change could have on his ability to get a mortgage.
"I found a better job," he wrote. "How does this affect the loan?"
We asked Scott Sheldon, a senior loan officer in Sonoma, CA, and a Credit.com contributor, and he said the answer could depend on what kind of job and whether it involves a relocation.
The best-case scenario, Sheldon said, would be a job in the same field with the same pay structure. So, if you've been working as, let's say, an X-ray technologist at a hospital and you take a similar job at a medical office, it's probably not going to affect your mortgage. But if you've been working as an X-ray technologist and you get a new job as a kindergarten teacher, it might. By the same token, if you've had a regular, salaried job (with a W-2) with a hospital and you switch to a freelance (1099) position, your mortgage lender may have some concerns.
If you're moving from a freelance to an hourly (or salaried) position, Sheldon said it would likely be no problem at all. What would likely be more of a challenge is getting a lender's approval when you're changing fields. Big changes or uncertainty can make lenders skittish.
Sheldon said the very most important thing is to keep everyone involved in the transaction aware of what's going on. No one wants a surprise at the closing table.
"What you should do is tell the loan officer when you get into contract or as soon as you know exactly what might happen so they can best position you for success," Sheldon said.
Chances are, buying a home is no impulse decision, and you've worked long and hard to make it happen. You probably saved a down payment, and, hopefully, you checked your free annual credit reports and were careful to maintain or improve your credit so that your mortgage application would be approved and you could qualify for desirable terms. (You can get your credit scores for free on Credit.com to see where you stand.)
And if a great job opportunity comes up near the end of the process, you don't want it to jeopardize your chances at homeownership -- nor do you want the pending closing to ruin a career opportunity. In the same way, you'll want to be calm and deliberate about changing jobs or careers while you're completing the final steps toward homeownership. Our reader indicated he had already accepted the better job and planned to start work soon.
Accepting a job before knowing how it could affect your loan approval carries risks, particularly if you are relocating, taking a pay cut (so that you might have trouble qualifying for a mortgage), changing fields, or moving into a job with an irregular income. So the very best course is to keep your lender informed every step of the way. The lender may tell you something you don't want to hear, but it is also motivated to make the deal work and should be able to advise you accordingly.
Whether that results in your closing earlier or making the job switch later, you'll want to be confident that closing will go smoothly.
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