Worried about qualifying for a mortgage? You’re not alone. Sometimes even billionaires don’t qualify for a home loan, and it can have nothing to do with income or credit history.
Automated mortgage lending systems can flag recent job changes as an indicator of a high-risk lender. Why? A lender can’t make a case for a borrower’s future income based on their current income when jobs are in transition. Borrowers in this situation just don’t have as much paperwork to back up their financial stability, especially if they have gaps in their work history or have changed their pay structure — say from salaried to commission.
Luckily, simply changing jobs or pay structures doesn’t rule out qualifying for a mortgage if you’re ready to be upfront with lenders and are prepared with key paperwork. Follow these tips to plan ahead when a new job prospect is on the horizon and, assuming your credit and income do stack up, you should qualify with ease.
Give lenders a heads-up on new job prospects
First, if you expect to change jobs during the mortgage application process, tell your lender upfront so they can work with you on meeting the requirements. As you ease into your new job, send any relevant work documents to your lender as soon as possible. If you sign a new job contract, forward it right to your lender. Got a new compensation package? Send it over to your bank.
You’ll have to notify your lender of any material changes, including job changes, at the very close of settlement anyway, so the earlier you alert your lender, the better.
Step up your paperwork preparation
Having your paperwork ready is a good practice for any borrower, and it’s especially important for those with income and job changes.
Lenders need to see proof of income. Those first pay stubs from your new gig are especially important to have on hand to show you can continue to meet your bank’s income requirements.
Pro tip: Lenders frown upon irregular, unpredictable earnings, no matter how much you’re bringing in. To put their minds at ease, document as much of your previous irregular income stream as you can and try to calculate trends and averages that will help your case that you actually have a steady, reliable income.
Get your employer’s recommendation
Finally, try to get a letter from your new employer stating earning expectations and confirmation on the security of your job. A move from a salaried position into a commission-based pay structure will be less threatening to lenders who hear from an employer that workers in similar positions regularly draw healthy paychecks.
Has a job change made securing a home loan difficult for you? Share your experiences and tips in the comments below!