Ideally, when you’re ready to buy your first home, you’ll have been working a great job for a few years, have a promotion within the company on the not-so-distant horizon, and will feel confident, stable, and ready for growth in your career as well as in your new home. Unfortunately, life doesn’t always work that way. Sometimes, the best job opportunities arise at the worst possible times, such as while you’re house hunting.
If you’ve already accepted that new job, will you need to build up your employment history all over again? Will you really need to wait a few more years to buy your first home? Not necessarily.
What Employment Factors Do Lenders Consider?
Lenders typically prefer a solid employment history of at least two years with the same company. While it’s true that the underwriter of your loan will verify the employment history you provide – including dates, title, likelihood of continued employment, and income – and will raise a red flag if it appears things have changed since you submitted the information, there’s more to be considered than the two-year time frame.
An underwriter will request you to provide at least two years of work history, and will use that information to determine your income. Whether you have a salary, hourly wage, commission, or some combination of the two, the underwriter will calculate your average monthly income to determine how much mortgage you can afford. A job change, negative wage change, or gap in employment history can raise a red flag when it comes to ensuring you have adequate income for a mortgage.
What if You’re a First-Time Home Buyer With a New Job?
First, you’ll need to consider whether your new job makes financial sense. If your move seems risky, such as a transition to a completely new career field or a potentially unstable new employer, your new job could negatively affect your ability to get a loan. If you are moving in a positive direction to a job offering a higher salary or more benefits, the underwriter will not usually see much of a problem.
Keep in mind that lateral moves with the same pay should be to a higher-quality company or a company providing more benefits. Lateral moves without a pay increase can make it seem like you’re an unstable employee without a steady source of employment. If you’ve made a lateral move for some other reason – a job that won’t require an hours-long commute, doesn’t rely on commission, or some other stabilizing feature – the underwriter can consider these factors.
What if You’ve Received a Job Offer?
If you’ve received a job offer but are still with your original employer, you may want to consider making the actual change after the home loan process. Keep in mind, however, that if you are pre-approved with your original income, your best bet is to continue with your original employment until the buying process is complete. Since purchasing a home can take as many as 60 days from start to finish, you may want to consider other options.
If you have an offer letter in hand from your new job, and that job is a positive career or lifestyle move as described above, your lender may consider an offer letter mortgage. An official offer letter from your new employer should detail the position, the terms of your employment, start date, salary, and signatures from both parties. Your lender is essentially looking for proof that you will maintain steady for the next three years, and an offer letter can provide such proof. You won’t receive the funds until your first pay stub from the new job, however.
What if You’re a New Graduate?
Recent college graduates may not have the steady employment history usually required of first-time home buyers, but education is often reason enough for lack of steady employment. If you are moving right from college into your chosen career field, most lenders will not see a problem. However, if you’ve had a significant time gap between graduation and your first job, or if your job is not related to your degree, an underwriter will likely raise a red flag.
What if You’re Moving?
Many people move while in the process of beginning a new job. If you’re moving to Seattle, for instance, from some other location in Washington state, your lender will need to balance the cost of homes in the area with your new income. In addition, you’ll likely need to prove you have sufficient cash reserves or employee moving benefits from your new job to handle a move. Finally, the loan must usually close within 60 days of beginning your new job, and you’ll need a pay stub to receive the funds.
Beginning a new job doesn’t have to be a black mark on your employment history, especially if you’re a first-time home buyer that qualifies for the multiple first-time home buyer programs. As long as the job change is a positive financial move and you have the required credit history, your home buying adventure should continue without a hitch.
About the Author:
Information is provided by Sammamish Mortgage, a Premiere Mortgage Company in Pacific Northwest including WA, ID, OR, CO.