Buying a house is probably the largest financial transaction you’ll ever make. You might think that switching jobs would improve your chance of getting a mortgage, especially if your new position would pay more than your old one, but it could make lenders nervous and might even cause your loan application to be rejected.
Information Lenders Consider When Assessing Mortgage Applications
A lender will verify your employment status, length of employment and income before deciding whether to approve you for a home loan. A lender may also ask your employer if it’s likely that your employment will continue for at least three years.
Most lenders look at employment and income for two years prior to the time of a mortgage application. The most important thing they’re looking for is stability. They want to know that your income and employment situation are likely to remain consistent and that you will be able to afford monthly mortgage payments.
Lenders will consider the amount and type of income you receive. If you’re paid an annual salary, a lender will look at your average salary over the past two years. If you get paid hourly and your hours fluctuate from week to week, a lender will consider your average income. Overtime pay and bonuses may be included if you regularly receive these types of income.
If more than 25 percent of your annual income comes from commission, a lender will consider your average income over the past two years. If you’re self-employed, you may need to submit more detailed documentation showing your income for the past two years.
How a New Job Could Affect Your Mortgage Application
Changing jobs shortly before applying for a mortgage might help you qualify. A promotion or a move to a higher paying position in the same field could be a sign of financial security.
In some circumstances, a job change could make a lender nervous. If your new job paid less than your previous one, you switched from a salaried job to a position in which you were compensated mostly in the form of commission or bonuses, you began working as a contractor or become self-employed, you got a job in a new field, or you have made several job changes in a relatively short period of time without progressing to higher levels of pay and responsibility, that could make you appear risky to lenders.
Is Changing Jobs a Good Idea?
A new job might help or hurt your chance of qualifying for a mortgage, depending on the circumstances. A lender will look at your income, how you are paid and how consistent your income and employment history have been. If a new job could raise doubts about your ability to repay a mortgage, you might have to provide additional information or have trouble qualifying for a loan. In some cases, you might be better off staying in your current position until after you’ve bought a house.
