Buy a home is a big step, and sometimes it happens at the same time as a career change. Whether you’re starting a new job, switching industries, or moving for work, you might wonder if it’s possible to buy a home during this transition. The good news is, yes, it is possible—but it takes some extra planning and preparation. This guide will help you understand how to buy a home with a job change, step by step, so you can feel confident moving forward.
Can You Buy a Home with a Job Change?
Yes, you can buy a home even if you’ve recently changed jobs. However, lenders want to see that your income is stable and reliable. Most lenders prefer borrowers who have been in their current job or industry for at least two years. If you’ve just started a new job, you might face some extra hurdles, but it’s not impossible. With the right documentation and a strong financial profile, you can still get approved for a mortgage.
What Lenders Look For
When you apply for a mortgage, lenders want to make sure you can afford the loan and will keep paying it back. Here are the key things they look at:
- Employment History: Lenders like to see at least two years of steady work, either in the same job or in a similar field. If you’ve recently changed jobs, they’ll want to know your new role is stable and similar to your old one.
- Income Stability: Your income should be predictable. If you’re on a salary, this is easy to prove. But if your income comes from commissions, bonuses, or overtime, lenders will look at your average earnings over the past two years.
- Credit Score: A good credit score shows you’re responsible with money. Most lenders require a score of at least 620 for conventional loans, but some government-backed loans (like FHA loans) may accept lower scores—though you’ll pay higher interest rates.
- Debt-to-Income Ratio (DTI): This is the percentage of your monthly income that goes toward paying debts, like credit cards or car loans. Lenders usually want your DTI to be 43% or less, but some allow up to 50% if you have other strong factors, like a large down payment.
- Down Payment: The more money you put down, the less risk for the lender. While some loans require as little as 3% down, a larger down payment can make your application stronger and help you get better interest rates.
Documentation Needed
If you’ve changed jobs recently, you’ll need to provide extra paperwork to prove your new job and income are stable. Here’s what you might need:
- Offer Letter: A letter from your new employer that outlines your job title, salary, and start date (Offer Letter Guide).
- Pay Stubs: Recent pay stubs from your new job to show your current income.
- Verification of Employment (VOE): A letter or phone call from your employer confirming your job details (VOE Process).
- Tax Returns: If you’re self-employed or have variable income, you may need to provide tax returns from the past two years.
Tip: Let your lender know about your job change early. This helps avoid delays or surprises during the mortgage process.
Timing of Job Changes
When you change jobs can make a big difference in your home buying process:
- Before Applying for a Mortgage: If you change jobs before applying, make sure your new job is stable and you can provide all the necessary documents. It’s best to wait a few months in your new role to build a track record.
- After Applying but Before Closing: Changing jobs after you’ve applied but before closing can complicate things. Lenders will need to recheck your employment and income, which might delay your loan or even lead to disapproval if your new job doesn’t meet their standards.
- After Closing: Once you’ve closed on your home, changing jobs won’t affect your current mortgage. However, it might impact future refinancing options (Streamline Refinance).
Special Scenarios
Some situations need extra attention when buy a home with a job change:
- Self-Employed: You’ll need to show at least two years of tax returns and possibly other business financials to prove your income is steady (Self-Employed Mortgage).
- Commission-Based Income: Lenders will average your income over the past two years to determine how much you can borrow.
- Relocation: If you’re moving for a new job, make sure your lender knows. You’ll need documentation confirming your new employment and possibly a letter from your employer stating you can work remotely if needed (Relocation Guide).
Tips to Improve Your Approval Chances
If you’ve recently changed jobs, here are some ways to strengthen your mortgage application:
- Build Your Savings: Having a large down payment and extra savings shows lenders you’re financially stable.
- Improve Your Credit Score: Pay down debts and make all payments on time to boost your score (Credit Score Tips).
- Get Preapproved: This helps you know how much you can afford and shows sellers you’re a serious buyer (Preapproval Guide).
- Communicate with Your Lender: Keep them updated on any changes in your employment status.
Checklist for Buying a Home with a Job Change
To make sure you’re prepared, use this checklist:
- [ ] Get preapproved for a mortgage to understand your budget.
- [ ] Gather all necessary documents, like offer letters, pay stubs, and VOE.
- [ ] Let your lender know about any job changes early.
- [ ] Work on improving your credit score.
- [ ] Save for a down payment—aim for as much as you can.
- [ ] Consider a co-signer if you need extra help qualifying.
Conclusion
Buying a home with a job change is possible with the right preparation. By understanding what lenders look for, gathering the right documents, and keeping your lender informed, you can navigate this process smoothly. Everyone’s situation is different, so talk to a mortgage professional for advice tailored to your needs.