Changing Jobs During Mortgage Approval Process

This BLOG On Changing Jobs During Mortgage Approval Process Was UPDATED On November 30th, 2018

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 a 30 day pay check stubs prior to issuance of clear to close
  • Other lenders will just require one pay period of  pay check stub
  • Still, other lenders may accept an employment offer letter from the Human Resources Department of the new company
    • It needs to state and certify 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

History of 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 they 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
  • Lender will want additional information that new career as an insurance agent will likely to continue for the next several years and income will also be stable as well

Qualified Mortgage Guidelines

What are 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 of likelihood of stable income and employment for next three years.

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

Workers changing jobs during mortgage approval process and go from a W-2 income status to 1099, they will not qualify for a residential mortgage loan unless the 1099 job has been seasoned for two years:

  • For 1099 employees, they need a two year of 1099 employment to qualify for a residential mortgage loan
  • However, workers that go from a 1099 employee to a W2 employee, they can qualify as long as they can provide 30 day paycheck stubs

Gaps In Employment

What is Gaps In Employment

As mentioned in the 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 underwriter why they should feel secure in a new field of employment
  • Why they should feel secure that new job in new field of work will likely to continue for at least the next three years
  • Borrowers with track record for the past two years of overtime income and bonus income from previous employer:
    • Likelihood of overtime and bonus income will continue with new employer does not matter
    • New employer’s potential overtime and bonus income cannot be used
    • All overtime, bonus, part-time income needs to be seasoned for past two years to be able to be used as qualified income
  • If Borrowers were to stay with previous employer and not quit until 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.

  • 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 on closing real estate purchase and/or refinance
  • Changing jobs during mortgage approval process may potentially jeopardize whole loan
  • Mortgage loan could possibly be re-underwritten

Mortgage Guidelines On Gaps In Employment

Mortgage Lenders need to know past two years work experience. This does not mean that borrowers need two years continuous employment. Gaps In Employment is allowed.

Here is how Mortgage Guidelines On Employment Gaps works:

  • Six Months Or More:
    • If 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 borrower has been without a job for less than six months, they can qualify with a new full-time job:
      • Need 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 mortgage with direct lender with no mortgage overlays on government and conventional loans can contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@gustancho.com.

3 Comments
  1. Andrea says

    Thank you for publishing this, I can’t seem to find such helpful information elsewhere concerning tradelines and mortgage overlays.
    I have a question: with regards to the offer letter and underwriting approval, is it an issue if the offer letter states the job comes with a 3 month “introductory period” (aka probation period) whereby both employee and employer can “validate the suitability of the employment relationship”?
    Asking because we found it to be an issue by our lender, and was curious if it was a general rule in the mortgage industry to deny loans to those in new jobs under a probation period.

    1. Gustan Cho, NMLS 873293 says

      Probationary period clauses on an full time offer letter of employment is common. For example, we help many new police officers and/or other government employees get qualified for a mortgage. If you get hired by a police agency, they hire you as a probationary police officer. You are in the probationary period for two years. Other jobs have probationary work periods for three months to one year. This should not be a problem. We will just go by what is stated on the offer employment letter.

    2. Gustan Cho, NMLS 873293 says

      Andrea, I had my Associate Michelle McCue reach out to you. Hopefully, she answered all of your questions. If you have any further questions, you can post on the comment section or just email me at gcho@gustancho.com. Or call my cell at 262-716-8151 or text us for a faster response.

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