Changing jobs during mortgage approval process
Quick insights
- Changing jobs during the mortgage approval process can delay your home loan, especially if the new role has a different pay structure or is in a different industry.
- If the job change is within the same field and income is equal or higher, your mortgage loan could still move forward, but loan providers may require additional documentation.
- Mortgage lenders value stability, which means the closer you are to closing on a new home, the riskier it is to make any employment changes.
Purchasing a home is a huge milestone, but it often comes at the same time as other big life changes like switching jobs. If you’re in the middle of the approval process and considering a new job opportunity, you might wonder: Will this hurt my chances of getting a mortgage loan? The answer isn’t necessarily cut and dry. Loan providers prioritize financial stability, and even a well-paying new role can raise red flags if it disrupts your income consistency.
In this article, we will cover what happens when you change jobs while buying a home, and how to handle it without derailing your homeownership goals.
Can you change jobs while buying a home?
Yes, you can change jobs while buying a home, but it depends on the timing, the type of new position and how your income is structured. If you’re switching to a similar role with equal or higher income, and it’s within the same industry, your mortgage approval process may stay on track. However, any change in pay type (like salary to commission) or industry may prompt mortgage providers to pause or reassess your home loan application. The earlier you inform your loan provider, the better they can guide you through the necessary steps to avoid delays.
What to do if you’re changing jobs while buying a house
If you’re planning to switch jobs during the homebuying process, the key is to act proactively and transparently. Here’s what you can do to keep your mortgage loan on track:
- Tell your mortgage lender immediately: Don’t wait until your lender finds out through employment verification because this could cause them to reverify your employment status before closing. Informing them upfront can help build trust and make sure your road to closing is clear.
- Share your official offer letter and details of the new job: Provide documentation that includes your job title, salary, start date and whether the role is full-time, salaried or contract. A written offer letter from your new employer is often required.
- Avoid changing industries or pay structures if possible:Â If your new job is in a completely different field or changes your pay type (such as from salary to commission or W-2 to 1099 contractor), loan providers may see this as a risk. A lateral move within the same industry is usually less risk.
- Delay your job change if you’re close to closing on your new home, if possible: If your mortgage application is already in underwriting or you’re about to close, it’s a good idea to wait until after you have the keys to your home in your hand. Even small changes can trigger a re-review that may delay or derail closing.
- Be prepared for re-verification and updated documentation: Loan providers may need a new verification of employment (VOE), a pay stub from your new job or even an updated mortgage preapproval letter. Stay responsive and organized to avoid delays.
- Work with a mortgage advisor to assess the impact: Every situation is unique. A Home Lending Advisor can help you understand how your job change will affect your specific loan scenario and guide you through the best course of action.
How long do you need a job to qualify for a mortgage?
Loan providers may prefer at least two years of consistent employment, ideally within the same field. That said, it’s not necessarily a hard rule. Strong credit, low debt-to-income (DTI) ratio and a stable income source can sometimes compensate for a shorter job history. This may be especially true for someone in an employment transition. If you’re starting a new job, be prepared to provide a written job offer, recent pay stub or proof of the start date.
How mortgage lenders consider different types of income
Your income type plays a crucial role in mortgage approval. Mortgage providers look for predictability and long-term earning potential. Income is not the only factor but can be a significant representation of your repayment ability.
Here are some aspects of income lenders typically consider when reviewing a mortgage application:
- Annual salary: Salary is a straightforward income source that may give loan providers some assurance of your ability to repay a loan. If you’re switching from one salaried position to another, the lender might view your job change as low risk.
- Hourly: Hourly workers need to show steady hours over time. Fluctuations in hours worked can raise concerns.
- Overtime: Like bonuses, lenders want a consistent history of overtime pay to count it toward your qualifying income.
- Commission:Â Commission-based income is viewed as less stable and often requires two years of verified earnings to be considered.
Can you get a mortgage if you’re self-employed?
Yes, if you are self-employed you can qualify for a mortgage. This may require more documentation. Loan providers want to see at least two years of steady self-employment income, usually backed by tax returns, profit and loss statements and bank statements. The key is to show consistent income and financial stability, even without a traditional W-2 job.
Additional mortgage qualification factors
Employment is just one key part of the loan approval puzzle. Mortgage providers assess several aspects of your financial profile to determine your ability to repay the loan. Key qualification factors include:
- Credit score: A higher credit score shows you’re a responsible borrower and may qualify you for better rates and loan terms.
- Debt-to-income (DTI) ratio: Mortgage lenders compare your monthly debt obligations to your gross income (before taxes). Lower DTI means you may have better approval odds.
- Down payment amount: A larger down payment reduces the principal loan, which can reduce the lender’s risk and possibly improve your loan terms.
- Savings and assets: Mortgage providers like to see that you have enough in reserves to cover several months of mortgage payments if needed.
- Employment history: The stability and duration of your overall work history instills confidence, even if you’ve recently changed roles.
How does changing jobs affect getting a mortgage?
Changing careers during the mortgage approval process doesn’t automatically disqualify you, but it can complicate or delay your odds of obtaining approval. Lenders rely on consistent employment to assess your ability to repay the home loan. A switch to a new role, especially with variable income or in a new industry, may require additional paperwork or cause your home loan application to be reevaluated.
The earlier you communicate with your lender or Home Lending Advisor, the better they can help you stay on track.
Different scenarios when changing jobs
- Relocation for work: If you’re relocating to a new city for a job, loan providers will want to see a formal job offer and confirmation of your start date. You may also need to show that your income will continue seamlessly. If you’re self-employed, you may want to provide proof of any address changes.
- Industry change: Switching industries, especially to one with irregular or self-employment income, can raise red flags. If you’re leaving a salaried job for gig work or commissions, just plan to provide more documentation and answer questions to avoid possible delays.
Example: A borrower left their salaried job to become a freelance web developer. Even though their income eventually increased, they were required to provide two full years of self-employment tax returns before they could qualify for a home loan.
FAQs about changing jobs during the approval process
Have questions about how job changes or relocation might impact your mortgage? Here are answers to some of the common concerns homebuyers may face during the mortgage approval process.
Can I get a mortgage if I’m relocating?
Yes, but you will need to show a valid job offer, confirmation of income and ideally start the job before or shortly after closing on the home.
Can I quit my job before the closing process is over?
Yes, but quitting your job before you close on a new home can lead to a denied mortgage, even if everything else was in order. Losing your job may have a similar result or delay closing.
How does the lender check my employment status?
Loan providers may verify employment twice, once during the approval process and again right before closing. This usually involves contacting your employer directly to confirm your job status, income and start date.
In summary
Changing jobs while purchasing a home isn’t always a dealbreaker, but it does make the situation more complex. The key is to communicate with your lender early on in the process, provide documentation quickly and avoid changes to your income type or industry if possible. Whether you’re salaried, self-employed or somewhere in between, mortgage lenders want to see consistency and evidence of your ability to repay your loan.
If possible, speak with your lender, loan officer or Home Lending Advisor before making any career moves. Early communication could be the difference between closing on your dream home or having to start the loan approval process all over again.
