When you change jobs before buying home, you might be surprised by the adverse effects on mortgage approval. Since your income and employment status are considered carefully by mortgage lenders, changing jobs can result in higher interest rates or even rejection.Your Ability to Qualify

 

Salaried Employees

Switching employers should not create a problem if you are a salaried employee, saying in the same line of work and do not earn additional income from commissions, bonuses, or over-time.  In order to use commissions, bonuses, or over-time for qualifying, a 2 year history with the SAME employer is required.  The switch has less impact if you remain in the same line of work. You will hopefully be earning a higher salary, which will help you better qualify for a mortgage.

 

Hourly Employees

If your income is based on hourly wages and you work a straight 40 hours a week without over-time, changing jobs should not create any problems as long as you are staying in the same line of work.

 

Commissioned Employees

Because of the way that mortgage rules and guidelines calculate your income, you should not change jobs before buying a home if a substantial portion of your income is derived from commissions. Mortgage lenders will average your income and commissions over the last two years. Changing employers creates an uncertainty about your future earnings from commissions since there is no track record from which to produce an average. Even if you are selling the same type of product with essentially the same commission structure, the underwriter cannot be certain that past earnings will accurately reflect future earnings.  In this situation, changing jobs would negatively impact your ability to buy a home.

Bonuses

If a substantial portion of your income on the new job will come from bonuses, you may want to consider delaying an employment change. Mortgage lenders rarely will consider future bonuses as income unless you have been on the same job for two years or more and have a track record of receiving those bonuses. In calculating your income, mortgage lenders will average your bonuses over the last two years.  Changing employer means that you do not have the two-year track record necessary to count bonuses as income.

Part-Time Employees

You should not change jobs if you earn an hourly income but rarely work forty hours a week. Because there would be no way to tell how many hours you will work each week on the new job, there would be no way to accurately calculate your income. If you remain on the old job, the lender must average your earnings from part-time income over the last two years. You must have a 2-year work history of part-time income to count as income for a mortgage.

Over-Time
Your overtime income cannot be determined if you change jobs since all employers award overtime hours differently. If you stay on your present job, your lender will give you credit for overtime income. The mortgage lender will determine your total overtime earnings over the last two years to calculate a monthly average.

Self-Employment

Delay any change to self-employment before buying a new home. Buy the home first.
Lenders like to see a two-year track record of self-employment income when approving a loan. Plus, self-employed individuals tend to include a lot of expenses on the Schedule C of their tax returns, especially in the early years of self-employment. While this minimizes your tax obligation to the IRS, it also minimizes your income to qualify for a home loan.

Resources

Home Buyer Tips: Changing Jobs

Buying dilemma: job change matters | Inman News

How Changing Jobs Affects Buying a Home!

Changing jobs while buying a home… Help!

How Changing Jobs Affects Buying a Home and Mortgage Approval 

 

Comments closed.

%d bloggers like this: