What if you change jobs after you apply for a mortgage?

By Michael Jensen, Mortgage and Finance Guru

Edited by Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience

Updated October 20, 2020

First off, we should emphasize that if it is at all possible, you should avoid changing jobs during the mortgage process, especially after you submit your application. That said, if changing employers is absolutely necessary -- for example in the unfortunate event you lose your job -- it is still possible to qualify for the loan.

In this case, you need to provide additional documentation and potentially wait a moderate amount of time before you are approved. Continue reading to understand what you need to do if you change jobs after you apply for a mortgage.

As a first step, you are typically required to provide an offer letter or contract from your new employer that outlines the following job terms:

Start date

Position and title

Income

Type of compensation (hourly wage, salary, tips, commissions or bonus)

Type of employment (W-2 employee, 1099 contractor or other)

The offer letter should also confirm that the position does not have a probationary or trial period. If the job has a probationary or trial period, you are usually required to wait until the period expires before you can qualify for a mortgage.

Additionally, you may be required to wait a year or longer to be eligible for the mortgage if your new job results in the following changes:

You go from being a W-2 employee to self-employed or a contract worker that receives a 1099

You go from being paid hourly wages or a salary to being paid primarily by commissions and/or bonus

Your hours are reduced or you only work part-time. In this case you may not have enough income to qualify for the mortgage you want

If you are a full-time W-2 employee that is paid on an hourly wage or salary basis then this is an ideal scenario and there should be a relatively short waiting period before you can qualify for the mortgage.

Use ourMORTGAGE QUALIFICATION CALCULATORto determine the loan you can afford based on your monthly income and debt expenses

This is because you usually only need to provide one month of pay stubs from your new job to verify your income level and employment but you should confirm this requirement. This means you may need to wait a little before your loan closes, depending on your specific lender's qualification and document guidelines. Please keep in mind that the lender also verbally verifies your employment within ten days of closing, sometimes the day before your mortgage closes.

The qualification guidelines outlined above apply if you start a new job during the mortgage process but you still may be able to qualify for the loan if you change jobs but you are not scheduled to start your new position until after your loan closes. In this case the start date for your new job can be no more than 90 days after your mortgage closing date.

Also, in addition to providing your offer letter or contract, you are required to hold financial reserves equal to six months of total housing expense, which includes your mortgage payment, property tax, homeowners insurance and homeowners association (HOA) or co-op dues, if applicable.

You can also satisfy this condition if you can demonstrate that you have enough financial resources to pay all your monthly debt expenses, including your housing expense, for the number of months -- including partial months -- between your closing date and your employment start date, plus one. For example, if your loan is scheduled to close on June 15th and your new job start date is July 25th, you are required to have resources to cover three months of debt payments.

Additionally, if you have not started your new job before your mortgage closes you are only eligible for a purchase loan on a single unit primary residence -- refinances and multi-unit properties are not permitted. In this situation, you cannot be employed by a relative or an individual involved in the home purchase transaction.

In closing, if you are thinking about changing jobs during the mortgage process the best approach is to review your situation with your lender as soon as possible so you can understand their qualification requirements and develop a solution.

If you are still shopping for a mortgage, we recommend that you contact multiple lenders in the table below to compare their guidelines and loan terms. Comparing several proposals enables you to find the lender and loan that are right for you.

Sources

"B3-3, What are the requirements when employment is scheduled to begin after the loan closes?"  Selling Guide: Fannie Mae Single Family.  Fannie Mae, October 2 2019.  Web.