Outside of buying a house, there aren’t too many things that cause more stress and excitement at the same time besides getting a new job. But what happens if you’re doing both at the same time?
You may think that you can’t buy a house or refinance your mortgage if you’ve just gotten a new job, but it turns out that a new job doesn’t mean an automatic “no” from mortgage companies.
In fact, in many cases, getting a new job will not stand in the way of getting a mortgage, but it’s not true in every instance.
Let’s take a look at how lenders view employment and what you can do if you’ve just gotten a new job and want to apply for a mortgage loan.
Why is employment important to lenders?
As part of the underwriting process (the process where a mortgage company examines your financial situation to determine whether you qualify for a mortgage), lenders will request employment information and documentation.
The main reason for doing this is to ensure that you earn enough income to support the mortgage you are applying for.
In most cases, lenders will review two years of your income information in the form of W-2s, your tax returns, your paystubs, and other means. Another step they will take is a “verification of employment,” where the lender will contact your employer to verify your employment.
During this process, the lender will likely also ask your employer for more information about your employment, including how long you have worked there and how likely it is that your employment will continue.
Again, this is all necessary to determine whether you’ll have income that is both continuous and stable enough to cover your mortgage payments moving forward. Lenders are also looking for consistent employment without any gaps, as that shows you are a lower credit risk than someone who changes jobs all the time.
But what about if you have recently changed jobs? There’s good news.
A new job is not a mortgage dealbreaker
Even though lenders will review the last two years of your work history, a recent job change will not disqualify you from getting a mortgage. It really all depends on the nature of the job change.
If your new job is in the same field as your previous job and your pay is either equal or higher, there likely won’t be much of an issue. Depending on how recently you switched jobs, your lender may ask for additional documentation from your new employer, including your most recent pay stub and an offer letter (if there is a formal one).
A lender will also ask your new employer for a verification of employment certifying that you are indeed employed by the new company.
Possible red flags
However, if you switched careers or if your salary decreased, there may be an issue with being approved for a mortgage as lenders may view you as a higher credit risk.
It’s not a hard and fast rule though, as there may be mitigating circumstances that necessitated your job change, like a pandemic, for example.
Lenders may also analyze more closely job changes in which the type of income changes. For example: changing from a salaried position to commission-based or hourly pay may be problematic without the requisite history of receipt.
What happens if you get a new job in the middle of the mortgage process?
Getting a job during the mortgage process can also throw a bit of a monkey wrench into things, as your lender was likely underwriting you based on your previous employment situation. In this case, you will most likely be asked to provide updated versions of the documentation mentioned above. If your job change is viewed as stable and continuous, it probably will not derail your mortgage loan application.
But, if your job change comes with some of the red flags we discussed earlier, there may be a problem.
No matter what, it’s a good idea to discuss your job situation and status with your lender as you work through the mortgage process.
Do you have more questions about starting your mortgage journey? Contact a New American Funding Loan Officer for answers today.