Changing Jobs During Mortgage Approval Process

---

In this blog, we will cover and discuss changing jobs during mortgage approval process. There are cases where mortgage loan borrowers change jobs during the mortgage approval process or prior to starting the mortgage process. Many folks realize that changing jobs during the mortgage approval process can cause mortgage closing delays. But it is not the end of the world.

Every lender has different rules and guidelines when it comes to re-evaluating a mortgage loan applicant who changes jobs during the mortgage approval process. Some lenders require 30-day paycheck stubs prior to issuance of clear to close. Other lenders will just require one pay period of a paycheck stub.

Lenders may accept an employment offer letter from the Human Resources Department of the new company. It needs to state and certify the borrower’s new position, status, and salary. In this article, we will discuss and cover changing jobs during the home buying and mortgage process.

Type Of Job Change

The history of the same employment in the same field is a good indicator of income stability. Career changes often happen to many of us. However, if borrowers are changing jobs during mortgage process, lenders put more weight if their change jobs in their field versus a career change.

Most lenders prefer that borrowers make a lateral move in the same field. For example, an engineer taking on a new job as an engineer at a new company. There should be no issues. However, there may be an issue changing careers in a totally different field. For example, a mechanical engineer changes careers to become an insurance agent. The lender will want additional information that their new career as an insurance agent will likely continue for the next several years and income will also be stable as well

Qualified Mortgage Guidelines

The Ability To Repay Mortgage (Qualified Mortgage) is key. Mortgage Underwriters need to believe that a borrower is able to make their new mortgage payment. They need to believe that there will not be any income interruption. Lenders need to feel confident about the likelihood of stable income and employment for the next three years.

1099 To W-2 income: Changing Jobs During Mortgage Approval Process

Workers changing jobs during mortgage approval process and going from a W-2 income status to 1099, will not qualify for a residential mortgage loan unless the 1099 job has been seasoned for two years. For 1099 employees, they need two years of 1099 employment to qualify for a residential mortgage loan. However, workers that go from a 1099 employee to a W2 employee, can qualify as long as they can provide 30-day paycheck stubs

Gaps In Employment

As mentioned earlier, if new employment is not related to the same field of work, lenders might have a problem. Most lenders want two years of employment history in the same field of work or related field of work. A detailed letter of explanation most likely will be required. Borrowers need to convince mortgage underwriters why they should feel secure in a new field of employment. Why they should feel secure that a new job in the new field of work will likely continue for at least the next three years.

Borrowers with a track record for the past two years of overtime income and bonus income from the previous employer. The likelihood of overtime and bonus income will continue with a new employer does not matter. New employers’ potential overtime and bonus income cannot be used.

All overtime, bonuses and part-time income needs to be seasoned for the past two years to be able to be used as qualified income. If Borrowers were to stay with their previous employer and not quit until the mortgage loan has closed, then they could have used the overtime and bonus income

Changing Jobs During Mortgage Approval Process Not Recommended

Changing jobs during mortgage approval process is not recommended. For those who are planning on changing jobs, it is highly recommended that they change jobs after closing their home loan. Changing jobs during mortgage approval process will definitely cause delays in closing real estate purchases and/or refinancing. Changing jobs during mortgage approval process may potentially jeopardize the whole loan. A mortgage loan could possibly be re-underwritten

Mortgage Guidelines On Gaps In Employment

Mortgage Lenders need to know the past two years of work experience. This does not mean that borrowers need two years of continuous employment. Gaps In Employment are allowed. Here is how Mortgage Guidelines On Employment Gaps works:

Six Months Or More:

• If a borrower has been without a job for six or more months, they need to be in a new full-time job for at least six months to be able to qualify for a mortgage

Six Months Or Less:

• If a borrower has been without a job for less than six months, they can qualify for a new full-time job:
• Need an employment offer letter
• 30 days paycheck stubs prior to clear to close
• Written Verification Of Employment

Home Buyers and/or Homeowners who need to qualify for a mortgage with a mortgage lender with no overlays on government and conventional loans can contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com.

---