Monday, December 28, 2015

Is it OK to change jobs after applying for a home loan?

From time to time a client will ask me if changing jobs will affect their chances of being approved for a home loan. There have even been a few times they didn’t mention that this was happening until it was too late. The truth is that most of the time lenders don’t like such a drastic change when deciding if a given person is “credit worthy”.

That’s not to say that changing jobs during the application process will automatically result in a denial of your home loan but it does complicate matters greatly and is always a huge red flag to the lender. If there’s one thing that lenders want to see it is consistency. A person that earns an average wage and has worked at the same place for a number of years is considered much less of a risk than a person that has been making “big bucks” at a new occupation for the last 6 months.

If you think about it this makes good sense from the point of view of the lender. If you had a friend that asked to borrow some money and has been working at the same place for a long time you would feel much more comfortable than lending money to someone that is always changing jobs, right? Lending institutions feel the same way.

Most home lenders require a minimum of 2 years of work history and also need to account for any times of unemployment as well as changes in income whether it be less money or more. It’s all about verification and proof and being able to demonstrate that you will be able to make your mortgage payment in the future, not just for the next 6 months or year. In short, changing jobs makes everyone a bit nervous.

There are situations where even staying with the same long time employer while changing positions can be a problem. An excellent example of this would be going from a salaried position to a commission based position, even if the possible earnings are much higher. This type of uncertainty is exactly what the banks are not looking for. Even if you do begin to earn a higher salary the bank basically needs to reapprove your application because something has changed and accuracy is required both by law as well as lender’s policy.

In the end, if you are staying within the same field of work than switching jobs may not be that big of a problem but beginning a new career or accepting a lower salary could easily cost you your dream home. My advice to anyone in this situation is always the same. Wait until you close on your new home and then make the change if at all possible.

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