A career move within the same firm or sector will have little effect on your prospects of getting a mortgage. Lenders assess your income stability to determine if you are a reasonable loan risk. Logical employment changes, such as those that boost your pay and work level in a profession where you have previously shown your abilities should not trigger any warning signals.
On the other hand, it can seem to lenders that you are at a greater danger of default when a career shift might make it more difficult to anticipate your income.
If you quit your job as a software engineer to work as a poet, for example, your bank could give you the cold shoulder. If you wish to pursue a career in poetry, it doesn’t rule out the possibility of buying a house, but a bank or mortgage lender will likely want a two-year history proof of steady income from your role as a poet.
Can You Change Jobs While Buying A House?
Changing jobs while buying a house might be risky. To qualify for a mortgage, loan officers will want to see at least two years of steady employment history, and if you change jobs during or soon after applying for a mortgage, this will raise a red flag with your underwriter.
In addition to examining your employment and sources of income, your mortgage lender will run a credit check and determine your debt-to-income (DTI) ratio to assist them in understanding how much you must pay each month toward the existing debt. This step is crucial since it will establish your ability to buy a home and the loan’s interest rate.
For the most part, it’s not a big deal if you transfer from one job to another within the same industry and earn the same or greater compensation. However, if you change careers or accept a lower-paying job, you may only qualify for a lower loan amount or have difficulty obtaining loan approval altogether.
Can you change jobs while buying a house? An underwriter may see your employment history as uncertain if you regularly change jobs without a raise or if you work in an industry less secure than others.
What Are Lenders Looking For In Your Employment History?
Different mortgage lenders have distinct policies on how much new jobs affect your ability to secure a house loan. Included in this list might be any of the following conditions:
- How long you have been working in your new position;
- Whether you’re a frequent job hopper;
- Whether you’re continuing on in the same industry or switching to a new one;
- How long you have been working in your present field;
- How home loan customers in your sector usually manage them, and
- How you’re paid (e.g., full-time, part-time, casual, self-employed).
However, even when you have a new job with a higher income than your prior one, this does not ensure your long-term success and security – there are still odds of not liking your new employment or failing in the position.
This can force you to look for better work again, harming your income and making it harder for you to pay back your mortgage payments.
Changing Before Vs. During The Application
Because lenders rely on the information you supplied in your application to make a decision, they always presume you are still employed in the specified position.
Avoid seeming dishonest to your lender by telling them about a new work offer you’ve received, so they don’t think you have fibbed about your employment status.
Making significant adjustments to one’s financial situation or professional path while waiting for the official, unconditional approval of a house loan might have a detrimental effect. In changing jobs before buying a house, you may want to think about waiting until after you have secured the house loan.
If you can show a lengthy history of financial security and work, however, some specific lenders would be prepared to give their blessing to your mortgage loan application even before you start your new job.
Can you switch jobs while buying a house? If you are transferring to a new job to enjoy better pay or a career advancement, lenders may view this more favorably than switching jobs, for example, because you were dismissed from your previous one.
Good Job Changes
- Moving to a higher salary in the same field;
- Moving to a better role in the same field;
- If your new job is in the same field and similar pay;
- A promotion at the same job.
Bad Job Changes
- Moving to a lower income;
- Moving from salary to part-time or commission;
- Moving from employed to self-employed or a contract employee;
- Changing to a different industry.
Red Flags For Lenders
Even if you’re generating more money with a commission-based income, underwriters may be leery of the shifting structure of your income and raise a red flag during the mortgage application process if your income pay structure has shifted from salary to commission. In this instance, if you are transitioning from an annual to a commission-based income, the underwriters of your loan will still want a minimum of 24 months of income prior to loan approval.
Is it bad to switch jobs before buying a house? Changing jobs in the following situations might cause a delay in your home loan:
- Switching jobs while buying a house and from a salary to a commission- or bonus-based job at that;
- Taking up the role of a freelancer or consultant;
- Moving to an entirely new business or profession;
- Lateral movements at work, and
- Multiple windows of unemployment.
How To Manage Changing Jobs When Buying A House
There is no guarantee that starting a new job would make it more difficult for you to get a mortgage. However, keep your lender updated on recent job changes and quickly supply any documentation they might want, such as new employment contracts and pay stubs.
One last warning, do not change jobs until after closing on a house and you’ve been approved for a mortgage.
Changing Jobs And Relocating
Getting a home loan while moving for work is feasible, but the entire mortgage process might be cumbersome.
Getting pre-approval for a mortgage before shifting jobs or places is a good rule of thumb. Loan pre-approval may need a letter from your present employer stating that they know you are relocating and will enable a long-distance working arrangement if your new location is more than 25 miles away from your current one. For new employment, they’ll require proof of new income as well.
Underwriters, on the other hand, will want to ensure that your new work will be in the same field and pay you as least as much as your old one.
The bottom line is to always speak with your mortgage lender when making a significant change during the home buying process, as they will be able to guide the best course of action for your situation.