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How to Get a Mortgage with a New Job

If you’re about to accept a great job offer, but are also eager to snag a low mortgage rate to buy a home, there’s good news: you can do both. Mortgage lenders offer flexibility when it comes to getting a mortgage with a new job, but you’ll need to know the rules before you fill out a loan application.

Can I get a mortgage with a new job?

Yes, but you’ll need to provide some extra documentation and a letter of explanation for the mortgage. In  some instances, a job change before closing on your loan may actually delay or sabotage your loan approval.
Lenders are concerned with three key things when it comes to your income for a mortgage approval:

  1. How stable it is. Lenders gauge your ability to repay a loan by reviewing your most recent two-year employment history as the benchmark for approval.
  2. How predictable it is. Salaried or full-time hourly income is an example of predictable income. Because bonuses, commissions and overtime pay are typically not guaranteed, the income can vary, which may affect your ability to repay a mortgage.
  3. How much debt you carry compared to your income. Lenders divide your total monthly debt by your gross monthly income to determine your debt-to-income ratio (DTI). The  Consumer Financial Protection Bureau (CFPB) recommends a maximum DTI ratio of 43%, however, some loan programs may allow for higher percentages in certain scenarios.

Acceptable scenarios for a job change

It will be easier getting a mortgage with a new job if you:

  • Have taken a position within a field you’ve worked in for two years or more. Lenders are less concerned if you’re starting a new position in a field you have experience in, especially if you’re earning more or taking on a higher-level role.
  • Have recently graduated from college. Your college transcripts and degree may be requested as evidence of your focus on a particular field of work for a new job, and be used in lieu of on the job experience.
  • Have related trade school certification or training. Advanced training or certification in a trade may give you higher earning potential, which is positive in a lender’s eyes.
  • Have recently retired from the military. Veterans who can show their new job duties are related to their military service may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs (VA).
  • Have an offer letter with a start date and pay rate. Once an employer puts your pay rate and start date in writing, you may be approved for an “offer letter mortgage.” The catch: Your start date needs to be within 60 to 90 days of closing.

Unacceptable scenarios for income and job change

You could be denied a mortgage or required to jump through more hoops if:

  • You’ve switched to commission income. Because you have to document at least 12 to 24 months’ worth of commission income for qualification, it’s best not to switch to an all-commission gig before you apply for a home loan.
  • You’re trying to qualify with recent bonus income. Lenders typically want to see a history of receiving bonus income for two years in order to count it.
  • Your income is mostly from recent overtime pay. Unless your employer will state, in writing, that overtime pay is guaranteed, you won’t be able to use it to qualify until you’ve received it for two years.
  • Your new position is based on contract or per-diem pay. Income that’s based on short-term contracts or gig work isn’t usually acceptable unless you’ve been receiving it for a year or two.

Applying for a mortgage with a new job

The table below provides a breakdown of employment and special conditions you’ll need to meet when you’re getting a mortgage with a new job.

Loan Type Employment Verification Type Employment Requirements Special Conditions
Conventional loan Signed employment offer Start date must be no later than 90 days after the closing date

No contingencies

Purchase only

Primary residence

One-unit home

Non-family employer

Base income is enough to qualify for the loan

Cash reserves to cover monthly debt until job start date

Federal Housing Administration (FHA) loan Signed employment offer Job must begin within 60 days of the closing date Cash reserves to cover monthly debt until job start date

Why cash reserves are important if you’re changing jobs

Cash reserves are funds that can be converted into “cash” quickly, such as the balance in a checking or savings account. In order to qualify for a mortgage before you’ve received a pay stub at your new job, you’ll have to show you have enough reserves to cover your mortgage payments and other monthly liabilities in the meantime. Conventional lenders also request an extra one-month payment cushion.

Documents you’ll need for an offer letter mortgage

Although the income paperwork may vary from lender to lender, you’ll typically need the following paperwork when you’re getting a mortgage with a new job.

  1. Signed employment contract. Lenders will accept an employment offer only if it’s signed and dated by both you and your employer.
  2. Proof of any transitional income. If your current job ends before your new one begins, provide your final paystub.
  3. Bank statements to prove cash reserves. When there’s a significant lag time between your new job’s start date and your loan closing, lenders may ask for up to 60 days’ worth of bank statements to prove you have enough money to cover mortgage payments and other monthly debts.
  4. Employment history. List start and dates on the loan application for all the jobs you’ve worked the past two years to document job history for a home loan. If you weren’t working but completed training or education related to your new job, have copies of transcripts, degrees or certificates of completion handy.

FAQs about getting a mortgage with a new job

Can I get a mortgage if I’m self-employed for less than one year?

No. Newly self-employed borrowers must prove income with one to two years’ worth of tax returns.

What if an employer refuses to verify employment for a mortgage?

Unfortunately, you won’t be approved for a mortgage if your lender can’t confirm your employment with the employers you’ve listed on your application.

What should I write as a reason for a job change?

Lenders typically want to verify the new position is a promotion, provides better pay and/or benefits than your current job or is a better match for new skills you’ve acquired.

Can you get a loan on an offer letter?

Yes, as long as the job starts within the guidelines outlined above. However, the offer letter must be signed and dated; an initial offer won’t cut it.

Can I get a mortgage with a contract job?

Maybe, if you work in a field with a union that can provide proof of your current employment as well as confirm the likelihood the contract will be renewed.

Can I get a mortgage without a job? 

Yes. There are no-income verification mortgages that allow you to use assets or bank statements to prove you have the cash flow to repay your loan. To qualify, though, you’ll need a higher down payment amount, and expect a higher interest rate and payment.

 

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