Can I still buy a house while changing jobs? This is a common question asked by prospective home buyers. In short, the answer is probably so but it depends on the circumstances. After all, buying a home in a competitive market can already be a stressful and lengthy process for some. We discuss some key factors that lenders are looking at and how these may impact your ability to buy a home.
What lenders review
Of course, the primary concern for lenders is to confirm that you are able to make your mortgage payments on any house that you purchase. With this said, they will scrutinize how often you’ve changed jobs and any periods of unemployment. Most lenders will also give weight to the following factors:
- The overall health of your industry and company
- Your training, experience, and qualifications
- The outlook of jobs that match your training and experience
- Your work history beyond two years
- Any promotions or increases in pay
Loan approvals continue until closing
It is important for buyers to know that even though you may be approved for a loan initially, it does not necessarily mean that the coast is clear. This is why it is imperative that any job change is handled with extreme caution during the home search and leading up to a potential closing. For example, not having a two year work history with a specific employer can be catastrophic for the loan approval process.
Of course, this does not mean that you are not able to switch jobs entirely. For example, if you take a new job with more pay in the same industry, most lenders will view this as acceptable. It is quite possible that lenders will request three years of expected job stability from your new employer though. Regardless, if you are planning to switch jobs it is important that you make your lender aware.
Things that make lenders nervous or can derail a loan approval
Recent unemployment or even a change in your job structure or compensation plan can wreak havoc on your chances of obtaining a home loan approval. For example, if you are transitioning from an occupation with a steady base salary to another occupation that is strictly based on commissions, this will raise a flag to lenders. The reason for this is because the new income is too volatile and may be considered too risky. Furthermore, most lenders will request a 2-year history of employment to reassure that there is a steady and reliable source of income.
If you are thinking about resigning from your current position to start a new business, you may want to reconsider your timing as well. Once again, lenders will want to see a 2-year history of employment and steady income prior to approving a home loan. Of course, the early years of starting a new business are typically the most volatile and come with the highest risk. Furthermore, most businesses will take some time before turning a profit due to the high initiation costs. As with most things in life, timing can be everything.
Summary
In closing, all home searches should be accompanied by a well thought-out plan. When initiating a home search, it is a best practice to surround yourself with a team that includes a local and knowledgeable real estate agent, a mortgage broker (if applicable), and a trusted real estate attorney. Of course, consulting with your financial advisor, accountant, or tax advisor is never a bad idea either. Of course, you should always avoid applying for new credit, switching banks, or co-signing on another loan. This would include any major purchases requiring financing such as a new car or boat as these will certainly impact your debt-to-income ratio. As a general rule of thumb, avoiding any large fluctuations of income or payments is also a great idea.
Are you considering a home purchase in South Florida? We can help. Contact Live South Florida Realty, Inc. today and begin building your plan for success.
