Buying a house is a significant undertaking. Many people use mortgages to raise some of the cash needed for this acquisition. You meet specific conditions set by lenders to qualify for these loans. Some changes in your life can affect your eligibility.
Loan officers often tell potential homebuyers not to change jobs during the home buying process. A switch in positions during the home buying process can rattle lenders, as they worry about the new homebuyer's employment and income stability.
When Switching Jobs Has No Impact
Some circumstances when switching jobs can't derail your home buying process. They include:
- A salaried or hourly employee who doesn't earn extra income via bonuses, commissions, or overtime switches to a similar job with the same structured pay.
- Switching to a job with higher pay and benefits in the same profession and industry
Lenders may not be too worried about your job change in these scenarios. Getting a high-paying position can make lenders more open to lending you more money to finance your property acquisition.
When Switching a Job Can Have a Negative Impact
A job change can be a big red flag for a loan officer if it makes your income unpredictable. Here are scenarios that can impact your mortgage application:
- Switching from a salaried job to one based on bonuses and commissions: The lender can average your bonus, overtime income, and commission over the last two years. Switching to this pay structure can complicate and derail your mortgage approval. You have no history that the lender can use to determine the amount and terms you can get. You may struggle to repay the mortgage if they give you more amount than you can manage. Getting a lower amount can limit the financing you get to support your new home acquisition.
- Becoming self-employed or a contract employee: It may not be appropriate to switch from W-2'd work to start your business or be an independent contractor. While some programs can accept a year of self-employment record, most lenders want a two-year history of self-employment. The underwriter can also struggle to calculate your earnings without your tax returns. This scenario can delay your mortgage approval until you file and pay overdue taxes.
- Switching to a completely different position or industry: Lenders look for signs that predict steady future earnings. Your work history won't be a reliable indication of future earnings if you change fields. Mortgage providers prefer borrowers with two or more years of experience in their current field.
- Frequent lateral job changes: Job changes that have career progression won't raise eyebrows. For example, moving from an intern to a permanent employee to a supervisor in the same company isn't a problem. An issue can arise if your frequent job changes don't have professional growth. Lenders can worry about your employment and income stability in such a scenario.
- Moving to a job with lower pay: Switching from a well-paying job to a less-paying one can be a red flag to mortgage lenders. The negative effect on your earnings can be a sign of instability. Lenders may worry that you won't pay your mortgage according to the agreed terms, making them more hesitant to give you a mortgage.
You Can Still Get a Mortgage
Switching jobs doesn't necessarily deny you a chance to get financing to buy a home. Lenders often consider your income and employment when evaluating your mortgage application. You may stand a chance of being eligible if you follow the necessary steps in various circumstances. Contact First Savings Mortgage to speak to our expert loan officers about this and other factors that can affect your home buying process.