How To Get A Mortgage With A New Job

Whether you’re a first-time home buyer accepting your first job offer or looking to relocate for a career change, getting a mortgage with a new job or shortly after switching jobs can be a bit challenging.

 

Between juggling a new job – and fingers crossed – your soon-to-be new home, it can be easy to overlook some paperwork and steps required for mortgage approval. Luckily, we can help you avoid missing a step or document request during the home buying process.

 

Let’s discuss how lenders look at employment and how a new job or a career change may affect mortgage approval.

Can You Change Jobs While Buying A House?

The key to navigating a job or career change while buying a house is understanding how mortgage lenders look at employment and how it can impact mortgage approval.

 

When lenders look at a borrower’s employment, they review information such as their job title, length of employment and even the likelihood that their employment will continue.

 

They’ll also consider your income – how much you make and how long you’ve been making it – to confirm you earn enough to make your mortgage payments.

How Long Do You Need A Job To Qualify For A Mortgage?

To assess your ability to repay the loan, underwriters will verify your employment and income by requestingdocumentation of your work history for the past 2 years, including:

Mortgage lenders evaluate your income to confirm steady employment for at least 2 years. Lenders may be more cautious about lending to borrowers with gaps in their employment history, even if a borrower has a strong track record of paying their bills.

Before we move on to how changing jobs can affect your ability to get a mortgage, let’s take a moment to discuss how underwriters look at different types of income during the preapproval process and what happens to your qualification status when your income changes.

How Do Lenders Look At Different Types Of Income?

Beyond the length of employment, lenders also review income to determine whether a borrower qualifies for a loan and how much they qualify for.

Qualifying income what a lender will consider when you apply for a loan. There are many different types of income. We broke down the five most common types and how underwriters assess qualifying income for each type.

Annual Salary

If you earn an annual salary, your underwriter will take your annual gross income (your income before taxes or other deductions) and divide that number by 12 to determine your monthly income.

Salary Plus Bonus

If you’ve been earning an annual bonus for the last 1 – 2 years, your underwriter can use your bonus history to help determine what size loan you qualify for. However, before the underwriter can consider your bonus history, your employer may need to confirm that you’ll receive similar bonuses in the future.

Hourly

Depending on how your hours are calculated, hourly pay can get a little more complex. Underwriters will typically multiply your hourly rate by the average hours you work.

An underwriter will determine your monthly income by multiplying your gross pay per pay period by the number of pay periods in a year. Then they’ll divide the total by 12 months to determine your monthly income. The more documentation you can provide to show how many hours you work during an average pay period, the more accurately the underwriter can assess your income.

Overtime

Overtime pay is calculated much like a bonus. The underwriter will consider how much overtime you’ve received while working for an employer and factor the result into your monthly income. Underwriters will also look at your overtime history to see if you’ve consistently earned the same amount of overtime each year or if your overtime pay has gone down.

Commission

If you receive a salary and commission or your income is 100% commission, your underwriter will use the average of your commission income over a set period to determine your base income.

What If There Are Changes To Your Pay Structure?

While you may be able to get a mortgage with a recent change in pay structure, it may be harder to qualify. For example, if you’ve gone from earning a salary to 100% commission-based income, the underwriter must verify that the change won’t affect your ability to make your mortgage payments.

To help verify your ability to afford the mortgage, an underwriter may ask you for a letter from your employer explaining the reasons for the change in pay structure and for you to submit pay stubs to show how the change may affect your eligible income.

Can You Get A Mortgage If You’re Self-Employed?

Yes, you can qualify for a mortgage when you’re self-employed. However, a self-employed borrower must provide at least 2 years of verified income, which can be 2 years of self-employment in one line of work or 1 year of self-employment and 1 year of salaried employment in a similar line of work.

To verify your income, underwriters may request W-2s or IRS Form 4506-C (Request for Transcript of Tax Return). They may also request information from your certified public accountant to assess your business’s stability and profitability and determine your ability to repay your mortgage loan.

How Does Changing Jobs Affect Getting A Mortgage?

Changing jobs during or shortly before initiating the mortgage application process won’t disqualify you from getting a mortgage, but it may complicate the process.

Generally speaking, immediately switching from one job to another isn’t much of a problem. But if you get a new job and your income falls below what you need to qualify for a loan, you may need to explore other options, like buying a less expensive home or delaying your purchase. Keep in mind that for employees with commission-based jobs, a new job may initially result in significantly lower income “on paper.”

If you anticipate a job change before or during the home buying process, be proactive and speak to your lender. Typically, they’ll request:

If you know your job position or pay structure may change during the home buying process, make sure to communicatethese changes to your lender.

Getting A Mortgage With A New Job FAQs

Still have questions? Every lender has different requirements, but you can use these answers to frequently asked questions to confidently navigate the mortgage process.

Can I get a mortgage if I’m relocating?

If you’re preapproved for a loan in an area and relocate a significant distance from your job, your underwriter may require a note from your employer acknowledging your move and confirming their willingness to allow a long-distance working arrangement. If you’re getting a new job, the underwriter will need that documentation, too.

Talk to your lender before making the big move. They’ll know how you should handle everything and what you’ll need to do to continue to navigate the mortgage process.

How does a mortgage lender check on my employment status?

During the verification of employment process, the underwriter will contact your employer by phone or letter to verify your submitted employment information.

Can I switch careers while buying a house?

Generally speaking, switching to a new job shouldn’t pose much of a problem. But a borrower may jeopardize mortgage loan approval if their earnings disqualify them or their pay relies on bonuses, overtime or commissions.

If you’re constantly switching industries or jobs without a pay increase, it will likely cause a lender to take a more in-depth look at your mortgage eligibility.

The Bottom Line

Whether it’s your first job or you’re changing careers, you’ll follow the same underwriting process and must satisfy the same mortgage qualification requirements as other borrowers. 

Applying for preapproval with your mortgage lender is critical to ensuring your finances and credit are in order, and you’ll know how much home you can afford.