Businessman climbing stairs

As of June 25, 2018, we’ve made some changes to the way our mortgage approvals work. You can read more about our Power Buyer ProcessTM.

Whether you’re a first-time home buyer, fresh out of college and accepting your first job offer or a seasoned homeowner who’s looking to relocate for a change in career, getting a mortgage with a new or changing job can be a bit complex.

With so many exciting changes – a new job, a new house – remembering all the paperwork and processes you’ll need to get approved for a home loan can be overwhelming. Luckily, we’re here to make the complex simple.

Let’s discuss how lenders look at employment and how a new job or change in career might affect your mortgage qualification.

How Do Lenders Look at Employment?

During a process called the verification of employment (VOE), the underwriter of your loan will contact your employer either by phone or written request to confirm that the employment information you provided is correct and up to date.

This is an important step because a discrepancy in the information you provided, like a recent change in jobs, could raise a red flag and affect your ability to qualify for the loan. We’ll talk more about that later.

When underwriters look at your employment, they’ll typically obtain information such as your position title, length of employment and even the likelihood of your employment to continue.

They’ll also consider your income (the amount, the history and the stability) in order to confirm that you have the means to make your mortgage payments each month.

How Long Do I Need to Have a Job to Qualify for a Mortgage?

In the simplest terms, underwriters look at your employment and income as your ability to repay the loan. Therefore, they’ll usually request documentation of a two-year work history in the form of:

  • W-2s
  • 1040s
  • Tax returns (federal and income)
  • Recent pay stubs
  • Written or verbal VOE from current employer

This process is important because your income will determine how much home you can afford and the interest rate you’ll pay on the loan. Lenders are looking to see that you’ve been in a place of stable employment for at least two years, with no gap in your employment history.

Before we move on to how changing jobs could affect your ability to get a mortgage, let’s take a moment to discuss how underwriters look at different forms of income and what happens when your income changes.

How Lenders Look at Different Types of Income

Beyond the length of your employment, underwriters will look at your income to determine whether or not you quality for a loan and how much you qualify for. Income that can be considered to qualify for a loan is called qualifying income.

While there are many different types of income, we broke down the five most common types and how underwriters determine qualifying income for each type:

Annual Salary

If you earn an annual salary, your underwriter will take your annual gross income (income before tax) and divide that number by 12 months to determine what your monthly income would be.

In the case that you earn an annual salary including a consistent bonus (at least for two years) and your employer confirms you will continue to receive a bonus, your underwriter can divide your last two years of bonus income by 24 months to add to your monthly total. This could come in handy to qualify for a larger loan.

Hourly

Hourly pay gets a little more complex, depending on how your hours are calculated for your income. Typically, underwriters will multiply your hourly rate by the average hours you worked.

So let’s say you get paid biweekly: underwriters will determine your monthly income by multiplying your gross pay by 26 pay periods (that’s 52 weeks in the year divided by two pay periods). They’ll take the total and divide that number by 12 months in the year in order to determine your monthly income.

Overtime

Overtime pay is calculated similar to a bonus, where your underwriter will consider two years of overtime pay and divide by 24 months to determine your monthly income.

However, if your overtime pay shows signs of decline, meaning you’re making less in overtime as each year progresses, your underwriter may not deem it as qualifying income.

Commission

If more than 25% of your income is from commission, your underwriter will consider your base income the monthly average of your past 24 months of income.

This means the underwriter will look at the total amount of gross income you made and divide your income for the past two years by 24 months.

Self-Employed

Just like with any income verification, an underwriter will require at least two years of verified income to qualify for a mortgage when you’re self-employed. Verifying this is a little more complicated, but they’ll usually ask for additional documentation that may require some preparation.

This documentation can include an Internal Revenue Service (IRS) Form 4506-T, a Transcript of Tax Return. They may also contact your Certified Public Accountant (CPA) to assess the stability and success of your business, in regards to your ability to pay back your loan.

It’s important to remember that the way underwriters look at income will vary, meaning it’s best to talk to your lender regarding your income and qualification. Typically, if you have two years of work history and a steady, if not rising income, you should have no problems getting preapproved.

It’s important to note that if your income pay structure changed from something like salary to commission, underwriters may be wary about the changing structure of income and could raise a red flag during the qualification process – even if you’re making more money with a commission-based income. In this case, if you’re moving from an annual to commission-based income, underwriters will still want to see at least 24 months of income before loan qualification.

We’ll talk more about changing jobs next.

How Will Changing Jobs Affect Getting a Mortgage?

Because underwriters will request at least two years of work history, changing jobs during or shortly before going through the mortgage application process will raise a red flag to your underwriter – especially if you switch from a higher-paying job to a lower-paying one or switch job fields.

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 may have a harder time getting your loan approved.

Additionally, if your job switches industries, particularly from a stable to less-than-stable field, or if you find you’re frequently hopping from job to job without a pay increase, it may appear unsteady to an underwriter.

If you do find your pay structure or job position changing during or before the home buying process, it’s best to be proactive and speak to your lender. Typically, they will request:

  • An offer letter
  • A title change letter
  • Most recent pay stub
  • VOE from your employer

If you’re aware that your job position or pay structure may change during your home buying process, make sure you’re communicating these changes to your lender, too.

How Can I Get a Mortgage When I’m Relocating?

It is possible to get a mortgage when you’re relocating for a job, but it can get complicated.

Generally speaking, it’s best to get preapproved for a mortgage before changing jobs or locations. However, if you use the loan preapproval more than 25 miles away from your current job, your underwriter may require a note from your existing job documenting that they understand you are moving and will allow a long-distance working arrangement. If you’re getting a new job, they’ll need documentation of that as well.

However, underwriters will again want to make sure that your new job will be in the same field with equal or more pay.

It’s best to talk to your lender before making the big move, as they’ll know how you should handle everything and what you’ll need to move through the mortgage process.

If you’re ready to get started, you can get preapproved online through Rocket Mortgage by Quicken Loans. If you’d rather speak to one of our Home Loan Experts, you can call (800) 785-4788.

Related Posts

This Post Has 98 Comments

  1. Hello,
    I recently have been looking at homes for sale and have spoken with a lender for preapproval. I have been with a retail company for 5 years, but have recently been offered a job doing something a little different that would pay more money. Would taking a different job mess up my chances of getting the mortgage loan?

    1. Hi Mich:

      Paying more money is a point in your favor. If it involves doing something different though, and is in a different field, your mortgage lender might have questions. For starters, what’s the pay structure and will you be on salary, commission, etc.? When you start the job, will you have any kind of probationary status, or do you have a reasonable expectation of this being a long-term thing? Getting a new job alone isn’t a dealbreaker, but those are some of the considerations to keep in mind. If you want to go over your situation, you can speak with one of our Home Loan Experts at (888) 980-6716 two go over things more thoroughly. Thanks!

  2. I am currently in process of job verification from my job of 10 years and I took a year off in 2016 without pay to go back to school in the same field. Would that affect my chances of acquiring a FHA loan. I need to show employment for 2016 and 2017, but I also worked odd jobs here and there.

    1. Hi Donna:

      I’m going to recommend you speak with one of our bankers at (888) 980-6716. They would be able to go over your situation more thoroughly and talk it through with you. Thanks for reaching out!

  3. I am currently in accounts payable but looking to return to my old place of employment a bank. I was laid off in 2016 due to automation. But i would be going back in the fraud division not deposits like previously. I have only began the process of preapproval. Could this hurt my chances? I have no gaps in employment since the lay off I got a temp job and it turned into this position currently. The fraud position would pay more.

    1. Hi Denise:

      It’s hard for me to give you a definitive answer because the policies vary depending on your lender. I would say one thing you probably have going in your favor is that they’re both finance positions. It also doesn’t hurt that the new position pays more. My recommendation would be to discuss your options with one of our Home Loan Experts at (888) 980-6716. Hope this helps!

  4. Hello! My husband and I are ready to start the home-buying process. We have found a home that we love, but he just accepted a job offer from a new employer and he starts in two weeks. Currently he is working a commission-based sales job, but was just hired for a salaried retail management position. We are worried that the house we love is going to be gone if we don’t act fast. Given his changing employment, would we have trouble being approved for a loan? Do we need to wait until he starts the new job? Thank you!

    1. You could potentially have trouble, but every situation is different. I highly recommend speaking with one of our Home Loan Experts at (888) 980-6716. They would be able to give you the best possible advice in this situation.

  5. I am in last stage of my mortage approval. Waiting for survey map . Got a job offer from better company, same field, equal pay. I dont want to delay my lending process. Alread submitted the offer letter to my lender but concerned if they would require paystub too?

    1. Hi Hassan:

      I would talk to your lender and see what their advice is in this situation. It may be enough to see the offer letter, or they may want a pay stub. I can tell you that in general, going in the same field with equal or better pay will cause less problems than if it were a different field. But every lender has different policies.

      Thanks,
      Kevin Graham

  6. My husband and I are in the process of helping my mother sell her home before buying another home for all of us. We have already been preapproved for a loan. However, my husbands current job has him seriously considering quitting. I was forced to quit my job, so we know we need his job to be approved for a loan. If he changes jobs now will it hurt our chances of getting a loan?

    1. Hi Heather:

      My honest advice is he should stay in the job at least until the house closes. Preapproval doesn’t last very long, so if you can stick it out at all, do it. One thing that might help is if he was getting a job with the same or higher salary in the same field.

      Thanks,
      Kevin

  7. I recently started a new job in February, but am still employed at my other job where I work 1 day a week. Other job I work as a waitress so large portion of my income was tips which weren’t included in w2’s. A large reason behind me starting my new job is that it is a lot more stable and all of income would be reported. I would be 2 years at my restaurant job in July. And almost 3 months at new job. Would this job change be a huge issue ? Thought I was doing the right thing by trying to stabilize income but might’ve been wrong? Please let me know what you recommend.

    1. Hi Maria:

      In your situation, I’m going to recommend you speak with one of our Home Loan Experts at (888) 980-6716. Every situation is different, and they would be able to tell you which income we can use. Thanks for reaching out!

  8. My husband and I just moved from Illinois to Hawaii. We stayed in our job fields, but it took me five months to get hired. We are making significantly more in Hawaii (an additional 60k household income), however, when I talked to a mortgage lender, they would only go off of our Illinois wage, which is NOT enough to buy a home in Hawaii. Is this correct? Are we going to have to wait almost two years to purchase a home so our W2s reflect this change? Is there a way around this?? Not to mention, when this most recent W2 posts, we will be qualified for even less because I did not work the last four months of the year. Can anyone help?

      1. Hi Ali:

        Every situation is different, but we can certainly look into this for you. I’m going to recommend you talk to one of our Home Loan Experts. The number is (888) 980-6716. If we have any options, they’ll be able to tell you.

        Thanks,
        Kevin

  9. Our Quicken Loans contact told my husband who is a millwright and is currently working on the building of a chemical plant in Texas that he needs get a job in Oklahoma before we can get our loan process started. He has been with the same company for almost two years and if he got a job in Oklahoma his income would almost be halved. I’m confused by that request.

    1. Hi Reyna:

      I’m going to send this over to our Client Relations team. If you’re trying to buy a primary residence in Oklahoma and it’s more than a certain distance from the site of his current job, that could be the problem. However, I’m absolutely going to have someone look into this and give you a definitive explanation so we can help you move forward.

      Thanks,
      Kevin Graham

  10. We are in the middle of a loan application with a contract on a house. I work part-time in education but not a certified teacher. It is an hourly position that it paid like a salaried position in that my annual pay is divided into 12 months of pay. The loan officer and real estate agent KNEW I was looking and interviewing for a fulltime certified teaching position. I was offered and have verbally accepted a teaching job in an adjacent county: same field different employer, more income. Never DREAMED it could be a problem.

    Is this an issue? If it is going to wreck the loan application, I will “unaccept” the job. Do you have any experience with this kind of situation?

    1. Hi Catherine:

      I can tell you that every situation is different. I do see that you’re working with us. I’m going to get this over to our Client Relations team so we can have someone reach out to you about this.

      Thanks,
      Kevin Graham

  11. My husband and I just did not qualify for a mortgage loan coz my husband switched jobs 3 times in a year, though I have a very good employment track record but still got disapproved. How soon are we possible to re-apply? Does being disqualified affect my credit?

    1. I would recommend you wait until your husband has been at his job at least a year. Lenders want to see continuity of stable income. Being denied for a mortgage in itself doesn’t affect your credit. Having your credit report pulled temporarily drops your score a little bit, but it should go back up if you follow good habits like paying your bills on time and not carrying a huge revolving balance. Hope this helps!

      Thanks,
      Kevin Graham

  12. We are literally in the middle of purchasing a home. Offer accepted, earnest money given, secure long term jobs, inspection & appraisal done, bank approval, closing date set. I have a job offer for the same job at a different facility with a significant pay increase. I am hesitant because I do not want to mess up the purchase of the home. The job will not wait & it is rare that something will pop up again. Why do banks make such red tape? Horrible timing for all of it to come to a head. 🙁

    1. Hi Jen:

      If you’re getting a different job at the same company with a significant pay increase, you’re not changing fields and you’ll probably be in the job a while. I would tell your lender just to be sure, but I don’t foresee a problem. The reason for this particular requirement is that sometimes when you change jobs, there’s a probationary period. There’s no guarantee you’re going to be in the job long term. If you change fields, there’s always the possibility it doesn’t work out and in two months you’re looking for a job again. That’s the reason they have to take a hard look at these things. However, that wouldn’t seem to be the case here. You should be OK.

      Thanks,
      Kevin Graham

  13. My wife whom makes more than me has has a very stable job as well as stable work history. I however although have no gaps in work history, recently switched career (graduated college) and found out it the job wasn’t working out ( a few months later). I went back to my previous company and got a full time job in another career as my previous job wasn’t available. This new job would be the same pay but more hours. Have I screwed both of us up for getting a loan?

    1. Hi Andrew:

      Every situation is different, so I don’t think you should jump to any conclusions without speaking to someone. I’m going to recommend reach out to one of our home loan experts by calling 888-728-4702.

      Thanks,
      Kevin

  14. I’ve been away from work due to a medical condition, which then turned in to a personal leave of absence. If the company and I were to separate would it be advisable to apply for a mortgage now while I am still considered an employee?

    1. Hi Karen:

      I’m going to recommend you talk to one of our Home Loan Experts about your situation to get the best possible advice. You can get in touch with them by calling 888-728-4702.

      Thanks,
      Kevin Graham

  15. I lost my job 5 years into my mortgage. I had an employment gap in between then and now. I am selling my home and hoping to buy another in a neighboring town. The job I have been at for the past year is $6 less per hour than my previous job and I have been going through the application process for a reputable manufacturer which is coming into the area. I just received notice that my application is moving toward the interview phase and if I get the job I will be making $5 more per hour than I am now. If I am accepted for employment at the new employer, how will this effect my chances to secure a new mortgage after the sale of my current home? I plan on rolling the equity of my current home right into the new home which was estimated by my realtor of being around $25,000. I know this is convoluted and I appreciate any information you can give.

    1. Hi Penny:

      If you make more money, you should be able to qualify for a bigger home. The problem is that you really can’t tell the mortgage company until you actually get the job. Right now, it wouldn’t have much of an effect. If the mortgage process goes on for long enough, I suppose you could qualify for more. Hope this helps!

  16. My wide and I have credit scores in the 720 range, we moved and my employment changed and is not similar to past emlloyment. I am employed through a contract house on permanent assignment, yet I am labeled as a temporary employee. We were denied by two separate underwriters. Is there a way around this as we just lost our on our house and have been living with family for more than a year?

    1. I’m going to recommend you talk to one of our Home Loan Experts see what they normally advise that people do in this situation. My suspicion is that the temporary employee thing is holding them up. On the other hand, you have permanent assignment. Maybe you have the contract house verify that for the lender. In any case, you can get in touch with one of our experts by filling out this form or calling 888-728-4702.

      Thanks,
      Kevin Graham

  17. My boyfriend and I are looking to get our first mortgage at some point in 2017. He has worked solidly since leaving school, myself however have had numerous jobs since college with various short gaps in between. For the last year or so I have been setting up my own business (which I do not earn from yet) as well as working part time as a self employed cleaner. I am hoping to get an employed job very soon to increase our joint income. Will my work history and the fact I have not been employed just self employed for over a year or so be a great problem for us?
    Thank you in advance

    1. Hi Polly:

      Particularly with self-employment, it’s best if you talk to someone and go from there because every situation is unique. You can get in touch with one of our experts by filling out this form or calling 888-728-4702.

      Thanks,
      Kevin Graham

  18. Hi, my husband and I have been looking for a home for our family. We have all the necessary items to get a pre approval but ny husband was offered a job working for the city. It’s a great opportunity for our family. If there isn’t a gap between jobs do you think our chances of getting a loan are still good?

    1. Hi Katie:

      Having no gap of employment certainly helps. It also helps if he isn’t changing industries in the job switch. If that’s the case, you probably still have a pretty good shot at approval. That said, there are a lot of factors that go into approval, but those are the types of things that come into play when someone changes jobs. I hope this helps!

      Thanks,
      Kevin Graham

  19. My wife and i are just weeks away from closeing on a new house. Unfortunately as of today my company that i have worked for over 16 years decided it is being purchased by another company. What should we do ?

    1. Hi Chris:

      I would tell the mortgage company you’re dealing with there’s a chance they may have to re-verify employment with the new entity. However, assuming continued employment, you should be okay. You’re not actually changing jobs.

      Thanks,
      Kevin Graham

  20. I want to apply for a mortgage loan but my income is not enough to be on my target price range. I’m starting a new job and will only be the main source of income. Would it make any difference for the approval? I have no employment gaps and been on the job for 2 years but changing career with a different company with a higher pay. Thanks!

  21. I have recently been accepted for a mortgage on a house but switched jobs to further my career. The lender is now asking for Mays payslip, which I can’t provide, I start the new job mid July. Do you think this will be ok?

    1. Hi Brendan:

      There’s a lot of factors that go into the effect of a job switch including whether your salary went up and whether it’s in the same field as your current job. I’m going to have someone reach out and see if we can offer any advice.

      Thanks,
      Kevin Graham

  22. I just recently sold my bread route where i was misclassified and recieved a w2. there has been a lawsuit brought to the bakery becasue of the classification. I was completely commission based. I bought a new route with snyderlance co. and am now 1099 . Im still completely commision based. What can i do to get into my first home. I was with flowers bakery for 7 yrs.

    1. Hi Ronnie:

      I’m going to have someone reach out and see what we can do to get you into a loan. A Home Loan Expert can help you go over any options you may have.

      Thanks,
      Kevin Graham

  23. Great article to read, Thanks. I was living in CA working for the same company for over 7 years (cell phone store) was getting paid hr+commission and bonus, I moved to TX and have been at this job for about 1 year and 4 months (Owner financed Home sales) i also get paid hr+commission+bonus, i know its a different field but my job is very stable, i got denied by my bank BOFA because of the work history. I am very stable at my job, luckily i am very good at selling always being #1 in sales so my job is very stable and the company has been in business over 30 years. I was also looking at the Texas First Time Homebuyer Program (bond program 77) Please let me know if its something you guys could help. thanks.

    1. Hi Jonathan:

      I can’t say I’m familiar with that particular program, but we’d be happy to have someone reach out and help you look into your options so you know where you stand. They’ll be in contact.

      Thanks,
      Kevin Graham

  24. My husband and I are interested in buying a house 150 miles frm where we currently live. Our cost of living will decline by 50% but as will my husbands salary. He plans on telling his job he is leaving but was going to wait until we were approved for the mortgage. I realize its better to be upfront but will the loan underwriter realize our expenses will be dropping significantly and therefore his change of jobs and decrease in pay will more than suffice for our cost of living? I just don’t want to be denied a mortgage because my husband is leaving a job of 10+ years to a new industry and lower paying job. We both have excellent credit and high cash reserves.

    1. Hi Sarah:

      It’s probably better to be upfront. In terms of whether it’s likely to affect your approval status, every situation is different. I’m going to forward this to a Home Loan Expert so you can get their thoughts.

      Thanks,
      Kevin Graham

1 2

Leave a Reply

Your email address will not be published. Required fields are marked *