Embarking on a new career opportunity is an exciting prospect. When you are in the process of getting a mortgage, taking a new job can create many challenges. The decision to change jobs while navigating the complexities of the mortgage application process requires careful consideration and strategic planning. We will discuss the crucial aspects you need to be aware of when changing jobs while during the mortgage process.

Understanding the Lender’s Perspective

One of the primary concerns for lenders when evaluating mortgage applications is the stability of the borrower’s income. Changing jobs during the mortgage application process can raise red flags because of the uncertainty it creates around the borrower’s income. Lenders prefer borrowers with a steady and lengthy employment history because it ensures that the borrower has the income to meet their mortgage obligations.

Timing is Key

Timing plays an important role when it comes to changing jobs and applying for a mortgage. It is always best to make a job change before initiating the mortgage application process. This allows you to establish a stable employment history with your new employer before submitting your mortgage application.

Life is unpredictable and job changes may not always align with your homebuying plans. If you find yourself changing jobs during the mortgage process, communication with your lender is key. Depending on the mortgage program and lender, you may be able to get a final loan approval before you have started the job. The key to success is keeping your lender informed about your intentions before accepting a new job offer and provide any necessary documentation related to your new job.

Documentation Requirements

When changing jobs while getting a mortgage, lenders will typically request additional documentation to assess your financial stability. The good news is that your new employer wants you to be happy in your new job and will likely be helpful with anything that you need for the mortgage. Be prepared to provide:

1. Offer Letter: A formal offer letter from your new employment will document your new position, salary, and start date. Depending on the loan program, you may qualify for the mortgage without starting the job based on the job offer. Make sure that your offer letter meets the lender’s criteria which may include:
   • Start Date: The lender may require that your start date at the new job be within a certain number of days of the closing of the mortgage. When you are considering taking a new job, contact your lender immediately to make sure that the potential start date meets the loan criteria. If the start date has not been finalized, you may have some flexibility to make sure that it meets the lenders’ requirements.
   • Contingencies: Most lenders will require that your job offer is not contingent on anything. For example, many job offers in professional fields require that the employee be licensed to work in the profession in the local jurisdiction. Almost all job offers require a standard background check and verification of references. Depending on the lender and loan program, you may have to clear these contingencies before you can get a final loan approval. This may mean encouraging your new employer to clear out contingencies in the loan offer so that you can get the mortgage.
     
     
2. Verification of Employment: Almost all lenders will need to contact your employer and verify your start date and income at the new job. In some cases, the lender can do a verbal verification of your employment and income. In many cases, the lender will need to have a verification of income in writing from your employer. In many cases, your lender can complete the verification of income using an electronic system or online employment vendor, but technology is not always the answer. If your lender cannot successfully verify your income electronically, you may need to find a contact at your new employer who can verify your new employment and income.
   
   
3. Paystubs: If you have already started your new job, your lender may require you to provide paystubs to verify your income. If you have just started your job and do not expect to receive a paystub for a week or two, this may create issues for your mortgage. You may need to adjust the closing of your mortgage to ensure that your lender had the paystub in hand before closing on the mortgage. Let your lender know right away when you expect to receive your first paystub so that he can let you know what constraints that this puts on your mortgage closing or find an alternative to getting paystubs for your mortgage approval.
   
   
4. Explanation Letter: Your lender may require that you draft a letter to explain how your new job is a better opportunity for your career and expected income. If you new job has less base salary but an opportunity for higher overall compensation due to bonus or commission income, this letter could be important to convincing the lender that the new job will increase your income in the future. Similarly, if your new job will let you be a remote worker, you may need to explain this for the underwriter. If you are unsure how to draft a letter, ask your mortgage loan consultant and he should be able to help you out or provide template for the letter.

Impact on Loan Approval

Changing jobs can impact your loan approval, but the extent varies depending on several factors, such as the industry, the nature of the job change, and your overall financial stability. If the new job is in a similar field and offers a comparable or higher income, it may have a minimal impact on your mortgage application.

On the other hand, changing industries or moving from a salaried position to a commission-based one may raise concerns for lenders. You will typically need two years of bonus or commission history in the same industry to use this income to qualify for a mortgage. This would eliminate your ability to use any commission or bonus income from your new job. Also, you cannot use income from a sign-on bonus as qualifying income because there is no expectation that you will receive similar income in the future. It is critical that you discuss these changes with your loan officer before you accept a new job and provide any necessary documentation to ensure that you still qualify for the loan. To ensure that you get the mortgage approved, the best idea might be delaying the new job until after the mortgage closing.

Credit Considerations

In addition to income stability, lenders also assess your creditworthiness. While changing jobs itself does not directly impact your credit score, certain actions related to a job change might. For instance, applying for a new corporate credit card may impact your credit score and mortgage approval. Likewise, signing up for a loan to get a company car can create similar issues. Even if your company will reimburse you for a corporate credit card or company car, taking on this debt may impact your mortgage qualification.

It’s crucial to avoid making any major financial decisions or taking on additional debt during the mortgage application process. Focus on maintaining financial stability and making timely payments on your existing debt to qualify for your mortgage.

Loan Type and Restrictions

The type of mortgage you’re applying for can influence how a job change affects your application. Government-backed loans, such as FHA or VA loans, may have specific guidelines regarding employment changes. It’s essential to be aware of any restrictions associated with the type of loan you’re pursuing and communicate openly with your lender to understand how your situation may be impacted.

Seek Professional Guidance

Figuring out the rules about changing jobs while getting a mortgage can be complicated and overwhelming. You need to seek professional guidance from your Lakeside Bank mortgage loan consultant long before you accept a new job. If buying a home or refinancing your mortgage is in your plans, start speaking to your Lakeside Bank mortgage loan consultant before you talk to a new potential employer. Your Lakeside mortgage loan consultant can provide valuable insights tailored to your specific situation. They can help you understand the lender’s perspective, guide you through the documentation requirements, and offer strategies to strengthen your mortgage application despite a job change.

Conclusion

Changing jobs while in the process of securing a mortgage requires careful planning, communication, and a proactive approach. By understanding the lender’s perspective, being mindful of timing, and providing necessary documentation, you can navigate this complex terrain successfully. Seek professional guidance from your Lakeside Bank mortgage loan consultant to ensure you make informed decisions that align with your financial goals and aspirations. Remember, open communication with your lender is key to maintaining transparency and building trust throughout the mortgage application process.