One of the "don'ts" when buying a home and securing your financing is a job change. Losing your job is tough and can impact your chances of mortgage approval drastically. Lenders want to know that you can pay your bills. No job, no income, no mortgage loan. However, a job change can also give lenders a reason to reconsider.
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A spotty employment record with a lot of job changes in a short period of time will often lead to an unofficial label of "risky borrower." Many job changes leads lenders to the conclusion that your finances will be unsteady, making it difficult to get financing (not impossible, but it's certainly a difficult situation).
With all that said, there are times where a borrower will make a legitimate and necessary job change. So what happens when you start a new job under a new contract agreement with your employer? Will AmeriFirst Home Mortgage allow you to close before you start work without a paystub? Below are the guidelines for FHA and for Fannie Mae (conventional loans). These are what AmeriFirst Home Mortgage use for our lending guidelines.
Projected Income for a New Job
Projected income is acceptable for qualifying purposes for a borrower scheduled to start a new job within 60 days of loan closing if there is a guaranteed, non-revocable contract for employment.
The lender must verify that the borrower will have sufficient income or cash reserves to support the mortgage payment and any other obligations between loan closing and the start of employment.
The loan is not eligible for endorsement if the loan closes more than 60 days before the borrower starts the new job. To be eligible for endorsement, the lender must obtain from the borrower a pay stub or other acceptable evidence indicating that he/she has started the new job.
Examples: A teacher whose contract begins with the new school year, or a physician beginning his/her residency fall into this category.
Employment Offers or Contracts
If the borrower is scheduled to begin employment after the loan closes, the lender may, depending on its risk appetite, use the borrower’s offer or contract for future employment and income to underwrite and close the loan. If receipt of the income or employment information cannot be obtained prior to delivery to Fannie Mae, the loan is ineligible for delivery.
Verification of Employment Offers or Contracts
The lender must document the borrower’s income and employment history per B3-3.1-01, General Income Information (06/26/2012).
The lender must obtain the borrower’s offer or contract for future employment and anticipated income. The lender must determine whether to close the mortgage loan prior to the borrower beginning the new employment.
The borrower must begin employment before the lender delivers the loan to Fannie Mae. The lender must obtain a paystub from the borrower that includes sufficient information to support the income used to qualify the borrower prior to delivering the loan. The paystub must be retained in the mortgage loan file.
*from All Regs which uses Fannie Mae guidelines and FHA’s 4155 guidelines
Read more about things to avoid doing before getting pre-approved or closing on your home on our blog. If you'd like to know something more specific, leave us a comment with your question and we'll answer them. It's also a good idea to talk to a mortgage consultant before house hunting, so you know what to do (and what not to do) during the home buying process.