Just recently have a job change or receive a promotion? Despite what you might hear, it is still very possible to qualify for a mortgage to buy of refinance a home using your new income. The lending atmosphere is ripe with misconceptions about job gaps, job changes and occupational changes within the course of an employment time frame. You can get a mortgage if you switched jobs or even changed industries, do it the right way and you’ll seal the deal.
In the past, lenders were ready to strike down loan applications where there was a job change or an industry change. Even real estate professionals will tell you don’t change jobs, before applying for a loan, and that very well may be the case for most, but it is not black and white.
*No matter what a lender is going to need an offer letter, a role change letter if there is a title change and commensurate compensation package change, and the most recent pay stub and verification of employment in order to close on a mortgage.
Hourly Employees
Hourly employees are under the tightest lending microscope.Why? An hourly employee may have a set full-time schedule which is ideal for lending purposes.However, if this person works slightly less than a full-time schedule. Less than a 40 hour work week with fluctuating hours from week to week can muddy the water.
The income gets averaged as long as you’ve been an hourly employee even if you’re making more money now on a per hour basis. That’s right, if you were making $40 an hour at the new job, and you now earn $50 per hour, the averaged income over the last 24 months would apply, since there is no history of making the higher per hour wage.
An offer letter, a current pay sub, and a detailed description of the compensation structure with a new employer could yield an exception due to a relocation or an alternative circumstance. In either capacity, a most recent verification of employment will bridge the gap between how many hours worked in the year to date supporting federal new ability to repay requirements.
Salaried Employees
Lenders love this group the most. Why? A set salary offers a streamlined income calculation used in qualifying. If you’re changing from one salaried roll to another salaried role, despite a job gap, this should be no problem for qualifying for a mortgage so long as you can explain any gaps in the most recent last 24 months.
Job gaps even if you had multiple jobs all have to be detailed and itemized with dates so there is no gap of employment or if there is there is, a transitional story is what lender needs.If you have changed jobs from one salary roll to another salary roll with a different title and a different position even within a different industry that still should be fine for your lender as you are paid the same way, a flat salaried income.
Salaried With Overtime, Commissions Or Bonuses
New Job? New salaried role with big commissions, over time or bonuses? If there is not a history over this additional add-on income, it cannot be counted for use when qualifying for a new loan. Take for example a police officer for a last 24 months has earn over time plus salary and they are changing jobs to become fireman with over time potential, this can be used. It has to been consistent, a borrower can’t have a history of over time, change jobs and now have add-on commission income and expect a lender to use 24 months of add on income when there is a difference. In other words, consistency is key from commissioned role to commissioned role, over time role to over time role and so on.
Changing From Salary To Hourly
If you are moving from a salary role to an hourly role, the lender is going to have to use your hourly income supported with a pay stub and verification of employment. As long as the change is within the same field and your title and role are similar you should be in the clear.
Future Promotion Or Raise On Deck
Has it occurred yet? If not, you will be hard pressed to have lender to use projected income, even if it is guaranteed.
If you cannot provide pay stub with year-to-date income, usually a 30 day pay stub depending on your specific lender requirement, along with a letter detailing the change you loan can’t close. Let’s say for example you are searching for the house and you know in the next four months your income is going to be rising $6000 per month because you’ll have a new role within your respective employer. In order for that $6000 per month income to be used, you’d have to get the details of the raise, including the role change letter and at least one pay stub.
If consumers are thinking about getting a mortgage even if it is on the longer term horizon, opening dialogue with a lender now, may be in their best interests to best guide them through any income bumps the past or future may hold. This especially goes for home buyers, it cannot be stressed enough how critical it is to get pre-approved with a lender upfront prior to house hunting. This process includes allowing a lender to review your credit, debt, income and assets to asses your qualifying strength.
New career on the horizon? If you may need that income to qualify, start today by getting a free mortgage rate quote.
