This BLOG On Buying House With New Job Mortgage Guidelines Was PUBLISHED On September 16th, 2019
Many home buyers are concerned about qualifying for a mortgage and Buying House With New Job.
- Many are under the impression that you need to be on the same job for the past two years to qualify for a mortgage
- This is not the case
- Borrowers can qualify for a new mortgage with multiple jobs in the past two years, gaps in employment, and just out of school
- Being in a job for a long period is definitely a positive factor
- It offers stability and likelihood of being secured in their jobs for years to come
- However, being on your job for the past 2 years are not required to qualify for mortgage loans
In this blog, we will discuss Buying House With New Job and mortgage guidelines on employment.
Importance Of Income And Employment
Income and employment are very important when it comes to qualifying for a mortgage.
- Income and employment are what determines the ability to repay by borrowers
- First time home buyers buying house with new job can qualify for a mortgage if they meet certain requirements
- They do not have to have a past two-year employment history with the same employer
- Lenders will require a two year past employment history by all borrowers
There are certain incomes that may or may not qualify as qualified income. We will further discuss this topic and buying house with new job.
Buying House With New Job After Full-Time Schooling
In general, lenders consider full-time education the same as employment history.
- All lenders will require the past two years of employment history
- High School, trade school, and college graduates right out of school can qualify in buying house with new job with no prior work history
- This holds true as long as they can document they have been a full-time student the past two years
- Transcripts will be required
With an employment offer letter, recent graduates can qualify for a mortgage if they are buying house with new job.
Buying House With New Job Offer Employment Letter
In order for recent graduates to qualify for a mortgage, the job offer employment letter needs to be a full-time position.
- The lender needs to feel confident that the job offers stability
- The new job offer needs to look promising in the borrower being likely to be employed for the next three years
- Part-time income or 1099 wage earners cannot qualify
All part-time, bonus, overtime, commission, or other income need to be seasoned for two years in order to be used in mortgage qualification by underwriters. All income needs to show promising outlooks in being able to continue for the next three years.
Ability To Repay New Mortgage Payments
Mortgage Underwriters always have the borrower’s ability to repay their new mortgage payments on time when they are calculating income.
- This is why the likelihood of the borrower’s income to continue for the next three years is very important
- Consumer credit payment history shows the ability and the past history of the borrower’s payment patterns
- It shows the borrower’s willingness to pay
- Income and employment show mortgage underwriters the borrower’s ability to repay
- However, with no income or loss of a job, the borrower will not be able to meet their debt obligations, especially their mortgage debt
Due to this very reason why employment and income are very important factors when qualifying for a mortgage.
Buying House With New Job Without 2 Year Employment History
You do not need to be in the same field in the past two years of employment.
- For example, a borrower can be an attorney but have changed careers to be a teacher in the past two years
- This would be acceptable
- Or if a borrower majored in biology but got a full-time job at the post office
This would be acceptable under general mortgage lending guidelines.
How Long Must You Be On Your Job
Buying house with new job with no prior employment experience is possible right after graduation with a solid offer employment letter by the employer.
Below Is A Chart On The Type Of Loan Program And Employment Guidelines:
Conventional Mortgage Guidelines In Buying House With New Job
Fannie Mae And Freddie Mac require two years of prior employment history by borrowers on conventional loans.
- Full-time education can be used to meet prior employment history requirements
- Gaps in employment are the same as all mortgage guidelines
- With conventional loans, borrowers can qualify for conventional loans with an offer letter of employment without starting the new job
This comes as a major benefit if the borrower is relocating to another state.
HUD Guidelines With Less Than Two Years Of Employment
FHA is different than conventional loans when it comes to qualifying for a mortgage with a job offer employment letter.
- The borrower needs to start work at their new place of employment and get 30 days of paycheck stubs before the mortgage underwriter can issue a clear to close
- This often creates a problem if the home buyers have accepted a job in a different state
Some may need to relocate twice.
Buying House With New Job VA Guidelines
VA allows full-time schooling to be used as part of the previous two years of work history requirements.
- Home buyers with VA Loans can purchase a new home with a job offer letter without starting the new job and/or providing 30 days paycheck stubs
- It is the same as conventional mortgage guidelines
VA Loans do not have a minimum credit score requirement or a maximum debt to income ratio requirement. Gustan Cho Associates at Loan Cabin Inc. are direct lenders with no overlays on VA Loans.
Buying House With New Job USDA Guidelines
USDA Loans offers home buyers to purchase a home with 100% financing and no down payment required.
- Both the borrower and the property need to meet USDA Mortgage Guidelines
- USDA Loans allow prior full-time education as work history
- Job offer letters are allowed with USDA Loans
USDA is different than other loan programs because there are two different mortgage underwriters underwriting the loan. The lender’s internal underwriter and the USDA Agency Mortgage Underwriter. The property needs to be located in a USDA designated eligible area.
Importance Of Sourced Qualified Income
Cash undocumented cannot be used in qualifying for a mortgage. Only documented sourced qualified income can be used.
Study The Income Chart Below:
How Is Salary Income Calculated
Salary income is calculated as follows:
- The gross income is used
- Mortgage underwriters calculate the monthly gross income by taking the annual salary and dividing it by 12 months
- The resulting figure is the monthly gross income used to qualify borrowers
Bonus Income Guidelines
Bonus And Other Income can be used as qualified income only if the borrower has a two-year history of earning the income. Bonus income cannot be declining. Other income that can be used are the following:
- Bonus Income
- Overtime Income
- Part-Time Income
- Commission Income
Hourly Wage Earners
Hourly wage earners income are averaged. Here is the chart that explains hourly wage earners income calculations:
Overtime Income Mortgage Guidelines
Overtime income can be used as qualified income if and only if the borrower had a two-year history of earning overtime income. Overtime income cannot be declining. Verification of employment is done to determine the actual overtime income that can be used.
Commission Wage Earners
Alex Carlucci is a senior vice president at Gustan Cho Associates that is an expert in helping 1099 wage earners and self-employed borrowers. Here is what Alex Carlucci says about commission income borrowers:
Borrowers who earn at least 25 percent of their income from commissions, the base income is the monthly average of your last 24 months of income. If you have less than 24 months of commissioned income, your lender probably can’t use it for qualifying. There are exceptions. For instance, if you work for the same company, doing the same job, and earning the same or better income, a change in your pay structure from salary to fully or partially commissioned might not hurt you. You have to make the argument, however, and get your employer to confirm this.
Self-Employed Income Mortgage Guidelines
Self-employed borrowers need two years of self-employment history. Lenders will average the past two years of the borrower’s income tax returns. The figure they will go by will be the adjusted gross income. This means that the net income after deductions will be used. Self-employed borrowers have the advantage and benefits of deducting expenses. If the adjusted gross income is too low and they do not qualify, they should explore qualifying with non-QM Bank statement loans for self-employed borrowers. No income tax returns are required. The way this loan program works is taking 12 months of bank statement deposits and averaging it. The resulting average monthly deposit is the borrower’s monthly income.
Starting The Mortgage Process With A Direct Lender With No Overlays
For more information about the content in this blog or other mortgage topics, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at email@example.com. We are direct lenders with no lender overlays on government and conventional loans. We also offer W-2 Income Only Mortgages and Bank Statement Mortgage For Self -Employed Borrowers with no income tax returns required.