Greek philosopher Heraclitus once said “the only constant is change.” As much as we would like things to remain the same – our babies to stay little, our waistlines to stay small, our mortgage rates to remain low – they never do, or will. This week’s Primary Mortgage Market Survey is out and rates are both higher and lower than last week. It just goes to show how quickly these crazy low rates can change. If you’re not refinancing into a lower rate, you may miss out on your opportunity. There is never going to be a better time, because tomorrow never comes.
That’s the long and short of it. Changing your job while applying for a mortgage is a big mistake that’ll land you in a metaphorical mortgage morass. That’s not to say that taking a new job will automatically disqualify you from getting a mortgage, just know that it’s a big red flag for mortgage lenders.
When considering a loan, underwriters look at, among many other things, three different aspects of your income – the amount, the history and the stability. The majority of loans require a two-year work history, and underwriters need to be able to document any employment gaps or changes in income.
To verify your employment, you usually have to provide your lender with pay stubs and sometimes a written verification of employment (VOE).
Jim Woodworth, a mortgage specialist team captain here at Quicken Loans, explains this further:
“The biggest issue that we see with changes in employment is when a change in pay structure occurs. For example, someone that goes from a salaried position to a commissioned position will encounter some obstacles with applying for a loan, even if the new job results in higher income.”
Your income helps decide how much loan you qualify for, and, if your income changes, then the lender has to reevaluate everything. Switching jobs causes an especially big problem if you take a new job at the end of the year because it will mess up your tax info and W-2s as well. Also, a significant time gap between jobs could be a problem because your income won’t look very stable.
Generally speaking, if you immediately switch from one job to another within your same field and get equal or higher pay, that’s not going to be much of a problem. But, if you start in a new career field or take a lower paying job, you’ll have a harder time getting your loan approved.
The bottom line is that your lender just wants to make sure you have a reliable income so you’ll be able to pay your mortgage every month.
If you have more questions on this topic or some suggestions of your own, let us know!
Here are some other Mortgage Missteps that you should be aware of: