How Does a Job Change Affect My Ability to Qualify for a Mortgage?

“I just got a new job with a change in pay. How does that affect my ability to qualify for a mortgage?”

You’ve been leveling up in life. Ninja to wizard to paladin knight in some kind of RPG game that would be cool to see, if it’s combining those classes. A recent raise at the job has got you wondering if now’s the time to pull the trigger on buying a home, securing a mortgage, and switching from renter to homeowner.

How easy is it? And do you qualify for more than you did pre-raise? Those are all excellent questions, and we’re here to provide the beta on how this route is going to get you to the top. Yes, you might say that buying a house is like scaling a mountain, dressed as a ninja or a wizard, however you spice up your life.

New Job, New Digs?

An increase in pay is always great. Pop open the champagne, celebrate, and give yourself a huge high-five (that’s what we’re doing right now). With that extra padding in your income, you can really save up for a down payment (which doesn’t have to be 20%—check out our information here about that.

Though you’ve landed a new job, it’s ideal to have had a solid employment history. This is because the lender wants to determine a stable amount of monthly earnings so they can figure out just how much you can comfortably afford to pay each month on a mortgage. They have your best interest in mind, and doing so protects you from finding yourself in a situation where there’s not enough for food, utilities, and the like each month.

So maybe you’ve heard that if you had a change in job, you can’t possibly qualify for a loan. Never fear, while this new job may be with a new employer, the switch may not adversely impact your chance to get a loan.

When you apply for a loan, the lender will ask for paperwork documenting why you changed jobs, your employment contract at the new job, and other information. This will give them a picture of how your employment history and pay looks for the past two years. Even better, if you’re salaried and the new job shows how you’re moving up in your industry, or if your job change was into a position in the same industry with a pay structure that resembles your previous job, then this will be even easier.

Bonuses, Commission, and Overtime Pay

When a lender looks at your income, they’re attempting to determine how stable your income is and, to some degree, predict the future. So income that’s considered W-2 is regarded as very stable, while income sources beyond that are super sweet (for you), but since they’re less predictable, they may not influence your loan, as in increasing the amount you can borrow.

Let’s say you have a stable, salaried job, and you’ve been there for two years or more. You recently picked up a side-gig freelancing. The income from this freelancing gig is considered variable. The lender can’t predict how long it will continue. So that means that it will likely have no impact on the amount you can qualify for.

However, if you have a two-year history showing that the extra income is steady and stable, there’s a possibility that it can be considered. It will vary from lender to lender, and as always, we like to recommend consulting with a loan officer about the details unique to you.

Changing Your Job During the Loan Process?

Though every situation is unique, your loan officer can guide you through whatever crazy bumps in the road that may come. That said, we highly recommend not switching jobs during the loan process. It will increase the time to process your loan because your lender will have to re-underwrite your loan. In general, it can make the whole situation harrier than it should be.

It may be unavoidable, however, so chin up, you can get through this. And if things  seem grim, getting some employment history at your new job will help you secure a loan again in the future, if your financing falls through on this one.

Ultimately, a raise is a sweet level-up in your life. Congratulations and cheers, you’re really getting a handle on your business. Though it may not seem like it will immediately translate into a bigger loan that’s commensurate with your new salary, a bit of time will provide the documentation that can leverage you into your dream situation. We’re here to provide personalized insights, so don’t be afraid to contact one of our stellar loan officers for an individualized look at your possibilities.

See sample scenarios here

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