It can be challenging to navigate the process of moving for a new job, especially when you have a mortgage to deal with. Review all of the details that are important to your lender.
Your loan approval can be affected by changing jobs. However, like most questions that are related to mortgages, the details are what matter. As long as you are moving into a new position with a higher or equal income, and you can provide the necessary documentation of your income and work history, there should only be minimal if any, changes to your chances of getting approved for a home loan. For lenders and underwriters, the most important thing is to ensure you will be able to repay your loan. The best indicators for this are your employment history and income.
It is important for lenders to know that you have a steady, and reliable source of income that will last for the next three years at least.
If you have changed jobs recently or are considering accepting a new position, consider the various ways it can impact your ability to obtain a mortgage.
Important things to be aware of when changing jobs before you apply for a mortgage
If your new position is in the same industry as your former job, and if you will be earning more money, then lenders most likely will not have any concerns. Promotions are viewed positively. Even a lateral move to a stronger company that offers better benefits or increased salary is a sound business decision that should not have a negative impact on acquiring a mortgage.
Most likely the lender will want confirmation of your new salary and ensure that your new role is a long-term position. Long-term contracts and full-time positions are best. Before your loan can be approved you will most likely need to work in your new position for 30 days at least. You will typically need to provide your offer letter that confirms your salary and the first pay stub from your new company. Also, be aware that lenders will most likely omit any commissions you earn from your total salary amount since in a new role commissions are unproven. That may affect the total loan amount that you are eligible for.
How to qualify for a mortgage after changing jobs
Avoid switching to a new job that does not make financial sense, including any major industry change, changing from being a full-time employee over to a contractor, or making a lateral move that pays less. An employment history that shows frequent career moves might a red flag for a lender that indicates you might not be able to maintain a reliable and steady income.
A long gap in your employment history can also be a potential red flag for a lender. You might have a stronger chance of obtaining a mortgage if you were unemployed for six months or less. However, a few exemptions include full-time students moving into the workforce or members of the military returning home from deployment. Those paths are considered to be a form of employment.
How to obtain a mortgage when you are relocating
If you are required to move for a new job you will need to make living arrangements before you relocate. The least stressful solution is most likely to rent in the new location for 30 days or longer and then give your first pay stub to your lender. Extended-stay hotels are one popular option to consider. That can give you the chance to become familiar with the local real estate market and community. If you will be working within the same industry and your new job offers a career or financial advantage, then your new position should not impede your chances of obtaining a loan quickly in the city you are relocating to. Keep in mind that this is not always required as some programs allow you to purchase your new home just with an offer letter which would avoid temporary housing.
Or you can try to buy and close on a house in your new location before you give notice at your current job so that you only have to make one move. If you are going to be moving quickly, you need to be aware that on average it takes 30-45 days for a purchase offer to close. During the loan application process, lenders verify employment and then do it once again right before closing, so you need to make sure you maintain employment until your sale has closed.
If you own a home and need to sell it while you are shopping for a new house, and potentially live in a rental at the same time, your finances can become tricky and demanding. If you can sell your current house before buying a new one it can provide you with money from closing to help with funding your down payment. That can give your loan eligibility a boost. However, if you are able to carry two mortgages for a short period of time, that will allow you to buy a house in your new location, directly move into the new home and then work on selling your old house remotely. Once again, there will be limitations in terms of how long it takes for the purchase agreement to close or you will new to disclose your new job to your lender.
Can a relocation package help with purchasing a home?
Companies often offer relocation packages ranging from covering moving service expenses to a Guaranteed Buy Out (GBO). A Guaranteed Buy Out involves the company purchasing your house for its average appraisal value if it doesn’t sell within a reasonable amount of time. Other relocation packages may help with your home sale’s closing costs or pay your real estate commission fees. If your home loan is underwater, your new may employer may cover the difference when it sells.
There are some relocation packages that help new employees buy a local house within one year of moving. They might contribute to your downpayment or buy down the interest rate.
Whether you are purchasing a house due to preference or out of necessity, getting a new job in the same industry for higher pay will not likely prevent you from getting approved for a loan but it could slow down the process by one month.