Changing to New Job During Mortgage Process

This guide covers changing to a new job during mortgage process. Changing to a new job during mortgage process is not a problem. Many of our borrowers have been told by other lenders they do not qualify for a mortgage unless they have been at their jobs for two years. This is not true. There are two different types of lending guidelines. The first is agency guidelines by HUD, VA, USDA, Fannie Mae, and Freddie Mac. John Strange, a senior mortgage loan originator at Mortgage Lenders for Bad Credit, says the following about changing to a new job during mortgage process:

All borrowers need to meet the agency guidelines. The second type of lending guideline is lender overlays. Lender overlays are additional lending guidelines imposed by individual lenders. Lenders can impose lender overlays of their choice. Not all lenders have the same type of lender overlays.

The lender can impose seasoning requirements on the time seasoned on a new job. However, per agency guidelines, there are no mandatory seasoning requirements a borrower needs to be on their new job to qualify for a mortgage. Mortgage Lenders for Bad Credit has no lender overlays on borrowers with a new job. In this article, we will discuss and cover changing to a new job during mortgage process.

Will My Loan Be Denied if I Change to a New Job During Mortgage Process

Changing to a new job during mortgage process can indeed be complex and even troubling. However, that isn’t the case for everyone. It depends on how you approach the problem. In this case, we are looking at how that change and the new position affect your communication with the lender. Changing employment can raise questions for mortgage lenders since they analyze your income and ability to repay the loan. Dale Elenteny, a senior mortgage loan officer at Mortgage Lenders for Bad Credit, says the following about changing to a new job during mortgage process:

Changing employment *before applying for a mortgage is one of the best ways to go about it since it’s likely that you will not face too many hurdles along the way. In general, mortgage lenders will want to see a two-year work history.

However, if the new position you have ticked off is a promotion, entails no probationary period, and comes with many perks, you shouldn’t run into problems. Having a strong offer letter along with a start date also helps. If you move within the tech industry, there should be no problems grabbing a new position with higher pay. Other documents like the offer letter, verification of employment, and even paycheck stubs will help make the process smoother.

What to Do If I Have to Change to a New Job During Mortgage Process

Things get quite complicated if you change jobs after applying but before closing. Lenders frequently check employment details just before disbursing funds, so a last-minute change may delay closing or, in the worst case, cancel your approval altogether. If your new position decreases your income, changes your salary to the commission without a prior two-year history, or moves you to a different field, it may raise red flags with the underwriter deducting risk. For example, you lack a steady track record if you abandon your steady accounting gig to pursue freelance graphic design. Therefore, lenders become hesitant, thinking you might default on payments. On the other hand, a promotion or lateral move with better pay in the same field is likely to generate concern as long as there’s adequate documentation to support it.

Does the Lender Need to Know If I Change to a New Job During Mortgage Process

The most important step is to notify your lender at once if you decide to change jobs during this process. An application reassessment is in order owing to new details, which may mean additional documentation like offer letters, updated pay stubs, or even a VOE from the new employer. Submitting an incomplete application could lead to suspicion of concealment, which may be detrimental to the deal.

Timing is equally important: at “clear to close” stages, changing jobs when no funds have been disbursed will still subject the application to final scrutiny. In practical terms, the simplest route is to change jobs after closing.

The lender does not have stipulations on one’s employment during the time of closing (although employment may impact future loan refinancing). Those unable to delay, owing to it being a once-in-a-lifetime opportunity or recent layoff, should highlight employment stability. Employment in the same field, unbroken contracts, and similar or higher salaries aid the cause. Shift workers or those moving to paid commission roles may need 1-2 years to establish the income history required by some loan types. However, FHA loans are often less stringent than conventional loans.

Getting A New Job During Mortgage Process

Homebuyers can qualify for a mortgage during the mortgage process. You do not need to be on a job for two years. If you have a great job offer after you are pre-approved and shopping for a home, you can change jobs and qualify for a mortgage. Lenders will require a letter of employment offer. 30 days of paycheck stubs from your new job are normally required prior to closing. The loan officer will recalculate your income based on your offer employment letter and verification of employment. Dale Elenteny, a senior mortgage loan originator at Mortgage Lenders for Bad Credit, says the following about changing to a new job during mortgage process:

The income is not averaged with your previous job. The income will be based on the offer employment letter. Overtime, commission income, and/or bonus income cannot be used unless these incomes have been seasoned for two years.

Lenders want to know the new job is secure and offers stability, and the borrower has the ability to repay due to the Dodd-Frank Act being put into place. Lenders will do their own due diligence and make sure the likelihood for them to be employed will be likely for the next three years. The borrower could get a new job in a totally different field. They do not have to be employed in the same field. Only full-time salaried and/or hourly wage earners are eligible for a mortgage after changing to a new job during mortgage process. Self-employed, 1099 wage earners, and part-time wage earners need to be employed for two years in order for their income to count. Recent high school, trade school, or college graduates do not need two years of job seasoning. They can qualify after leaving school or graduating. The time spent in school is equivalent to work history.

Getting a New Job During Mortgage process: Gaps In Employment

Your client’s goals might shift this guidance. If a client plans to get a mortgage shortly, using tradelines to increase their credit score quickly will necessitate a job change, which will prove problematic. Discuss this with the lender, explain it, and determine how it works within their underwriting guidelines. Each lender varies slightly—some may not mind a change within the same position, and some may require a few months of holding a position before permitting a change. Full disclosure will help advance the mortgage. Is there anything particular regarding your client’s situation that needs further examination? One of the most common questions we get asked from our clients is about employment gaps. What are the rules and regulations when it comes to employment gaps? Here is how gaps in employment work when it comes to qualifying for a mortgage:

• If you have been unemployed for six months or less, then there is no seasoning requirement on your new job to qualify for a mortgage
• Borrowers who have been unemployed for six months or longer, then is a six-month seasoning period on your new job to qualify for a mortgage
• If you have been unemployed for longer than six months but are returning to your last employer, there is no seasoning requirement

You do not need to be in the same line of work. You can get a new job in a totally different field. You can have had multiple jobs in the past two years and qualify for a mortgage. Lenders prefer borrowers to have been employed in the same field. They also like stability, where borrowers do not keep on changing jobs. However, changing jobs often is not a disqualification in qualifying for a mortgage.

Negatives of getting A New Job During Mortgage Process

Mortgage underwriters have a lot of discretion when analyzing and underwriting borrowers with new jobs. There are instances where a mortgage underwriter may not view the new job favorably and can potentially deny the loan. Cases where a borrower goes from a high-paying job to a new job with a wage decrease in a different field can prove not favorable. Going from a salaried job to a commission job is also not viewed favorably. Going from a W-2 wage earner to a 1099 wage earner is not viewed favorably. Lenders want to see job and income stability from borrowers. Lenders want to see positive factors when borrowers change jobs. For example, higher pay, better benefits, higher rank, and a promising future are what they want to see.

Getting A New Job During Mortgage Process: Going From W-2 to 1099 Wage Earner Status

If you are a W-2 wage earner and take a new job as a 1099 wage earner, you need to be on the 1099 job for two years to qualify for a mortgage. If you are a 1099 wage earner and take on a W2 wage earner position, there is no seasoning period, and you can qualify for a mortgage right away. Homebuyers need to realize this fact before taking on a job as a 1099 wage earner. Self-employed, 1099, commission income, and part-time wage earners need to be on their jobs for two years to qualify for a mortgage.