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Apply for Mortgage Before or After Move to New State?

Should you apply for a mortgage before or after you move to a new state?

Michael Jensen, Mortgage and Finance Guru
, Mortgage and Finance Guru

The answer to your question depends on two factors: 1) if you plan to keep your current residence; and, 2) your employment situation. How these circumstances apply to you dictates if you should apply for the mortgage now or wait until after you have moved to the new state.

If you plan to sell your current home -- or terminate your lease if you are renting -- then it may make sense to wait until you move states before you apply for a mortgage. Otherwise the lender may include your total monthly housing expense -- including your mortgage payment, property tax and homeowners insurance -- for that property in addition to the housing expense for the property you are buying in your loan application. Including the housing expense for two properties instead of one in your debt-to-income ratio can make it more challenging to qualify for a mortgage.

Your other approach if you want to apply for the loan before you move is to make the final mortgage approval conditional on selling your current home. This is no different than anytime you buy a new home and need to sell your existing home to fund your down payment or qualify for the loan.

In this scenario the lender factors in only the monthly housing expense for the home in the new state, which makes it much easier to qualify for the mortgage. In short, you only need to demonstrate that you can afford the monthly payment for one home instead of two.

Use ourHOW MUCH HOME CAN I AFFORD CALCULATORto determine what price home you can buy based on your monthly gross income and debt expense

The downside to this approach is that your mortgage does not close until you move out of or sell your current home. This can potentially delay the closing process depending on market conditions and other factors. While this is not really an issue if you are currently renting, if you fail to sell your home, your new mortgage may not be approved.

If you wait until you relocate before you apply for the mortgage you do not need to worry about the lender including multiple housing payments in your loan application. This is why it may be a little less complicated to apply after you have moved.

The table below shows mortgage terms for leading lenders. We recommend that you contact multiple lenders to confirm their qualification guidelines. Comparing lenders also enables you to find the mortgage with the lowest rate and fees.

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Current Mortgage Rates as of April 2, 2020
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Data provided by Informa Research Services. Payments do not include amounts for taxes and insurance premiums. Click for more information on rates and product details.

Your employment situation is the other point to consider when deciding when you should apply for the mortgage. If you are being transferred to a new state for work and there are no significant changes to your job including your type of employment, income level and how you are paid, then you do not need to wait to apply for the loan.

If you are starting a new job and the position has a probationary or trial period then you typically need to wait until this period ends before you are eligible for a mortgage. You may also need to wait if your income, type of compensation or employment terms change.

For example, if you go from being a regular W-2 employee to self-employed or a contractor that receives a 1099, then you may need to wait at least a year before you apply for the mortgage. The same guideline applies if you were paid on a salary or hourly basis and are now paid primarily through commissions or bonuses.

Additionally, if you are relocating to a new state without a job lined up then you usually need to wait until you employed on a full-time basis before you can qualify for a mortgage.

The final option to consider is to wait until you move before you apply but get pre-approved in your new state. This enables you to identify and address potential issues with your application and shop for a home with more certainty. Getting pre-approved can also make you a more attractive buyer to home sellers and streamline the process when you submit your mortgage application.

Use our get pre-approved form to get approved for your loan by top-rated lenders. Our form is free, no-obligation and does not affect your credit.

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About the author

Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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