How changing your income and job status may affect your mortgage chances

Securing mortgage loan financing requires an ample credit score enough equity and or down payment, but it also requires income. You must have documented proof of income as well as a two-year work history to qualify for nearly every mortgage loan program.

The following scenarios could be particularly beneficial or problematic depending on your financial situation.

If you are a W-2 employee from a company that you do not own that’s considered a positive so long as you have the two years’ work history (or education in lieu of the work history).

If however you are a W-2 employee from a company that you do not own and now you started a business and it’s in the same field you have to have at least 12 months of income identified on a tax return to use that income in order to qualify. If you have less than 12 months because you started your business for example mid-year that’s generally not going to be acceptable because you must have 12 months of documented income on a tax return to use that income meaning you’d have to wait for an entirely new year in order to qualify if you remain self-employed.

Working two jobs? You must have two years’ history of working two jobs simultaneously in order to use both incomes for both jobs in order to qualify whether you’re looking at an FHA loan or whether you’re looking at a Conventional loan. You’re hearing that right a brand new second job even though it’s income that can help you pay off debt or save money, but it will not help for income to offset a mortgage payment. In such a situation you would need a co-signer in lieu of using the second job income.

If you were working out of the country and or you are a new citizen of the United States or you’re here on a work visa the same thing applies you’re still going to need a 2-year work history working in the United States in order to qualify.

If you were previously self-employed and now you have a brand-new W2 job you’re in the clear. To be clear it must be a brand-new bonafide legitimate W2 job from a company that you do not own. If you are a W-2 employee and you pay yourself a salary from the company that you own that potentially could be problematic unless you’ve been filing self-employed for the most recent last five years at which point mortgage underwriting would only need one year of income tax returns in order to qualify. Yes, you can provide only 1 year if income tax returns filing self-employed so long as you have been filing self-employed for the most recent last 5 years.

If for example, you own the company from which you are earning wages and you’re bleeding your company dry in order to pay yourself a salary that’s going to be problematic especially if your 100% owner of the business.

Two caveats to this rule:

  • spouse is an employee of the company
  • you own less than 20% of the company

Hint if you’re an owner of the company and you own less than 20% of the business and you get paid wages as a w2 employee that income counts. Since the ownership is less than 20% the rule applies, you can bypass the need to provide additional tax returns so if you are losing money from a tax standpoint you can potentially still qualify as long as you have the W2’s and supporting pay stubs of the income needed to offset a mortgage payment.

The ways to offset not having enough income:

  • put more money down
  • Pay off debt even if the debt is 0% interest- that is always a possibility
  • get a cosigner
  • change mortgage loan programs
  • buy a less expensive house

If your situation requires anything unique or out of the ordinary it’s always good to talk to a lender who has the experience and knows what underwriting is looking for at the beginning of the process so they can best structure your loan in a way that will meet the requirements of the loan while putting you and your family into a program that you can afford.

Looking to get a mortgage? Get a no-cost quote now!

 

 

 

RELATED MORTGAGE ADVICE FROM SCOTT SHELDON

A wallet containing colorful credit cards with a bold text overlay reading "Refinancing Strategies to Reduce Credit Card Debt and Buy a Home – Refinance" against a blue background.

Refinancing Strategies to Reduce Credit Card Debt and Buy a Home

Refinancing Strategies to Reduce Credit Card Debt and Buy a Home If you’re sitting on…

"How Seller Credits Can Help You Maximize Savings on FHA and Conventional Loans" explaining what seller credits are, how they can be used for closing costs or interest rate buy-downs, the FHA 6% seller credit allowance, and a comparison table of conventional loan seller credit limits based on down payment. Includes a pie chart showing a split of 3% used for closing costs and 3% for interest rate buy-down.

How seller credit maximize your purchasing power on a conventional or FHA home loan

Maximizing Your Home Buying Power with Seller Credits When purchasing a home, every dollar counts.…

When buying a home, it’s natural to want the lowest mortgage rate possible. But sometimes, chasing a slightly better rate from another lender—especially after your offer has already been accepted—can backfire in a big way. Let’s walk through a real-world scenario. You’ve got an offer accepted on a house. You’re working with a lender who has you approved, documents in underwriting, and a 21-day close of escrow in place. Everything is moving forward. Then you hear from another lender offering a rate that’s 0.25% lower, with slightly better closing costs. It’s tempting. But before you make a jump, here’s what you need to consider. Switching Lenders Comes with Time Costs When you pivot to a new lender mid-contract, they’ll need to: Re-underwrite your entire loan, Order a new appraisal, Disclose and sign new loan documents, Submit the file for final loan approval, Schedule and fund closing—all over again. This doesn’t happen overnight. Even in ideal circumstances, the new lender is likely going to need at least 25–30 days to close. If you’re in a fast-moving or competitive market, this is a real problem. Most sellers won’t grant a contract extension just because you’re switching lenders. So, what happens next? A Contract Extension Can Jeopardize Your Deal Asking for a contract extension means the seller must agree to delay closing. But that delay introduces risk—especially if the seller has backup offers or simply wants certainty. They may not grant the extension. Or worse, they could cancel the deal outright and take another buyer’s offer. Even if the seller agrees to extend, your earnest money and negotiation power could take a hit. And for what? A slightly lower rate that might save you $50 to $75 a month? Mortgage Rates Aren’t as Far Apart as You Think Here’s the truth: all mortgage lenders get their money from the same place—the bond market. The pricing differences between lenders usually range from 0.125% to 0.25% in rate on any given day. If one lender seems to be offering dramatically better pricing, the first thing you should ask is: How? Head over to FreddieMac.com and check the average 30-year fixed rate posted weekly. This is one of the most reliable benchmarks for where rates truly stand in the market. If a lender is quoting you a rate that’s well below that average, ask for the details: Are they charging extra points? Is this a teaser rate with a prepayment penalty? Is it based on a different loan product or risky structure? Often, what sounds “too good to be true”… is. Consider the Bigger Picture Think long-term. If you’re financing $600,000, a 0.25% lower rate may reduce your payment by roughly $75/month. But what if you lose the house and have to start over? That monthly savings doesn’t mean much if you’re outbid on your dream home or lose your deposit. Also, remember: you’re not going to keep this rate forever. Today’s homebuyers typically refinance when rates drop by about 0.75% or more. So if rates fall within the next year or two, you’ll likely be refinancing anyway. Instead of paying extra points now or risking the entire deal for a minor monthly savings, it may be better to accept a slightly higher rate—knowing you’ll refinance when the time is right. The Real Risk Isn’t the Rate—It’s the Delay When shopping for a home loan, don’t just ask, “What’s your rate?” Ask: Can you close on time? Is this rate sustainable or based on hidden costs? Will switching lenders delay or jeopardize my contract? A home purchase contract is a binding agreement between you and the seller to perform within a set timeframe. If you can’t meet those dates because you're chasing a slightly better rate elsewhere, you may want to reconsider if now is the right time to buy. Final Thoughts Yes, interest rates matter. But execution matters more. Before making a switch mid-transaction, talk to your lender. Have an honest conversation about pricing, timelines, and strategy. You might find that staying the course, securing the house, and planning to refinance later offers a better path to financial security. Want to Know Your Options? Let’s compare rates and strategies the smart way—without risking your dream home. 👉 Click here to get a custom rate quote today.

The Risks of Chasing a Lower Mortgage Rate

Why Chasing a Lower Mortgage Rate Can Backfire When buying a home, it’s natural to…

A woman sitting at a kitchen table looking through documents with an American flag and framed military photo beside her, symbolizing a surviving spouse exploring VA loan options.

VA Loan Options for Surviving Spouses

Understanding VA Loan Refinance Options for Surviving Spouses Losing a spouse is one of life’s…

View More from The Mortgage Files:

begin your mortgage journey with sonoma county mortgages

Let us make your mortgage experience easy. Trust our expertise to get you your best mortgage rate. Click below to start turning your home dreams into reality today!