Can I change jobs while buying a home?

Buying a home is one of life’s most significant financial decisions, often requiring months of preparation and planning. Among the many factors that lenders consider during the mortgage approval process, job stability plays a crucial role. But what happens if you’re in the middle of buying a home and an opportunity for a new job arises?

Is it possible to change jobs during this critical time? Let’s explore the risks, potential solutions, and steps you can take to manage this situation effectively.

Why Job Stability Matters in the Mortgage Process

Lenders want assurance that borrowers can consistently meet their mortgage payments. To evaluate this, they closely examine employment history and income stability. A steady income provides confidence that the borrower has the financial means to take on long-term debt. Here’s why job stability is such a critical factor:

Income Verification: Lenders require proof of consistent income, typically through pay stubs, tax returns, or employment letters. Debt-to-Income Ratio (DTI): Your monthly income relative to your debts is key in determining how much you can borrow. Reliability: A long history of employment in the same field signals reliability and reduces the lender’s perceived risk.

Risks of Changing Jobs While Buying a Home

Switching jobs mid-process can complicate your mortgage approval or even put it at risk. Here’s why it can be problematic:

Delays in Mortgage Approval

When you change jobs, lenders may require updated employment verification, leading to delays in closing the loan. Additional documentation and re-qualification might be necessary.

Probationary Periods

New jobs often come with probationary periods where your employment isn’t guaranteed. This uncertainty can be a red flag for lenders.

Income Instability

If your new job has a different pay structure—such as commissions, bonuses, or variable income—it may affect how your income is calculated, potentially lowering your borrowing power.

Industry Changes

Moving to a different industry may lead lenders to view you as a higher risk, especially if the transition involves new skills or unfamiliar roles.

When Changing Jobs Might Be Acceptable

While it’s generally advisable to avoid job changes during the mortgage process, certain situations may be more acceptable to lenders. Understanding these scenarios can help you make informed decisions.

Higher Pay in the Same Field

A new role that offers a significant salary increase within your current industry is less likely to raise concerns. Lenders may view this as a positive change.

Full-Time Position from Freelance or Contract Work

Transitioning from a temporary or contract position to a permanent full-time job demonstrates stability and reliability.

Minimal Disruption to Employment

If the new job doesn’t involve a gap in employment or a shift in income type, the risk to your mortgage approval is lower.

How to Manage a Job Change During the Home-Buying Process

If changing jobs is unavoidable, proactive planning can help mitigate the risks. Follow these steps to minimize complications:

Inform Your Lender Immediately

Transparency is critical. Notify your lender about the job change as early as possible. This allows them to evaluate how it might affect your application.

Gather Documentation

Provide your lender with comprehensive information about your new job, including:

• Offer letter
• Employment contract
• Pay structure details
• Start date

Prepare for Income Verification

Be ready to submit recent pay stubs from your new job. Lenders may request proof of your first paycheck or additional financial statements.

Consult Your Mortgage Broker

A mortgage broker can provide expert advice tailored to your situation. At Original Wealth, our brokers work with over 60 lenders, ensuring we can find flexible options that suit your needs.

Key Considerations Before Switching Jobs

Before making the decision to change jobs, evaluate the following factors:

Timing

If possible, delay the job change until after your mortgage closes. This avoids additional verification and paperwork.

Savings Buffer

Having a robust savings account can help reassure lenders of your financial stability during the transition.

Role Details

Ensure the new job offers equal or higher pay and has a structure that’s easy to verify, such as a salary instead of commissions.

Alternatives to Job Changes During Home Buying

If the new job opportunity can wait, consider these alternatives to avoid complications with your mortgage application:

Complete the Purchase First

Finalize the home-buying process before transitioning to a new role.

Utilize Co-Borrowing Options

Adding a co-borrower with stable income can strengthen your mortgage application if job stability is a concern.

Rely on Emergency Funds

Use your savings to demonstrate financial security to the lender, especially if income verification becomes an issue.

Common Questions About Job Changes and Home Buying

Here are some frequently asked questions that can clarify your concerns:

Will my lender re-verify employment before closing?

Yes, most lenders will confirm employment shortly before closing. A job change at this stage could delay or derail the process.

What if my new job pays more but has a different pay structure?

Lenders may still require proof of stable income over a certain period, such as six months, especially for variable pay roles.

Can I switch industries and still get approved for a loan?

It depends on the lender. A switch within a related field may be acceptable, but a dramatic career change could raise concerns.

Conclusion

Changing jobs while buying a home can be challenging, but it’s not impossible. Lenders prioritize financial stability, so any changes that introduce uncertainty need to be carefully managed. If a job change is unavoidable, communicate with your lender early, provide all necessary documentation, and consider working with an experienced mortgage broker.

At Original Wealth, we understand the complexities of the mortgage process and are committed to providing personalized advice to help you navigate challenges like these. Whether you’re buying your first home or refinancing, our team of experts is here to support you every step of the way. Contact us today to learn how we can help make your home-buying journey smoother.