Yes, let’s go ahead and get it out of the way. Changing jobs CAN affect your loan approval, but that does not mean it MUST! Communication is extremely important to be able to pull this off and as a rule of thumb, if you are increasing your income (or maintaining the same income) in your job change, you won’t be affected too much. However, be prepared to substantiate all the changes and previous work experience along with income.
At the end of the day, lenders want to feel as comfortable as possible that you will be able to repay the loan. Lenders are not out there seeking reasons to say “NO” to you, so don’t give them preventable reasons to!
Let’s look at some pitfalls and solutions to navigate the mortgage & change of jobs scenario.
Changing Jobs Before Getting a Mortgage
A promotion is a very common reason an employment status changes. Lenders want to see proof of the promotion and, if possible, the check stub confirming the positive financial impact said promotion had. Where applicants get into trouble is seeking a loan approval with the expectation of a promotion (i.e. on something that has not happened yet).
A lateral move or better benefits should also not affect your application, especially when they are accompanied with an employment contract. An employment contract supersedes an offer letter as there are higher chances that the clauses within will materialize.
Keep in mind, that commissions may not be included in this change of job scenario as a new role is unproven in the eyes of the lender. In other words, only because you were successful in selling medical devices does not mean you will be successful in selling industrial equipment.
Job Changes That Affect You Negatively
The following scenarios negatively impact you in a lender’s eyes:
- Lateral move with less pay
- Change from full-time to contractor
- Major industry change
- Frequent career changes
- Length of unemployment
The amount of income is important of course but lenders are seeking patterns and stability at the end of the day.
Job Relocation and Mortgage
If you need to move, then there is a bit more balancing that occurs: selling present home, finding a desired area to live, balancing the new position, buying a new home, etc…
From a qualification perspective, staying in the same income bracket and remaining in the same industry still holds true. Again, the picture a lender likes to see painted is one of stability and avoiding uncertainty as much as possible.
One strategy, if your income levels sustain it, is buying a home in the new area without changing jobs. Lenders verify employment during the loan application and then just before closing. So, if you have that employment up through closing of the new home in the new area, lenders won’t have many questions. Again, this is all contingent on you being able to financially sustain two living quarters (apartment or already have a mortgage in the place you are moving away from).
If you are in the situation where you must sell BEFORE purchasing a home in your new area and you must make the employment switch, the suggestion would be to not try and juggle everything at once. Take you time to sell your home and even negotiate a lease back option to give your family enough time to move. Find an area in your town that you ‘think’ you would like to live in and seek a short-term lease on a home or find an extended stay apartment for you and your family. Spend at least 30 days in your new location before seeking a more permanent place. Remember, you have a new job that will require your attention, if you have children they will be needing some time to adjust as well and the family as a unit will be testing out the areas where life will happen outside of the home.
While one could, in theory, balance the sale of a current home before purchase of another with a new job, it’s advisable to avoid it if possible. Again, can it be done? OF COURSE! However, your stress levels will be greatly affected.