Getting A Mortgage After Transferring Jobs
Taking on a new position in a different state can be really exciting. There are new sensations of learning about new restaurants, exploring outdoor venues, and seeing a different part of the world.
It can also be a bit stressful. There is the chore of moving, communicating with the new utility companies, and getting a mortgage to buy a home.
Here are some tips and advice on how to get a mortgage after transferring jobs to another state.
Viewing Employment from the Lender’s Perspective
Lenders look extremely close at your source of income. This will likely be the main source of the pending mortgage payments and they wish to see some type of stability.
In broad terms, the mortgage lender wants to see a person with at least two years of stable employment. So, if you have worked at your current company for a minimum of 24 months, or you have had the same type of job for at least 24 months, then you are fine.
One thing that will cause a lender to pause is if you have less than 2 years in your current field. This situation will bring up lots of questions such as:
- How strong is the industry that you work in and how long has your employer been in business?
- Have you changed jobs multiple times in the past?
- Do you have any specialized training or certification for this new job?
- Have you received promotions and/or increased pay?
- What do other similar qualified people make at your same position?
If you are under the 24-month timetable at your current job, be prepared to explain why you changed fields or positions, and have documents to back up your argument.
Job Changes That Lenders Will Accept
Not all changes in jobs are the same. Some make sense and are even expected.
Here are examples and explanation of a change in a job that a lender will accept.
Let’s imagine a fellow named John that has worked at his local high school as the head baseball coach for 4 years. Thanks to his winning record, he has been offered an assistant coach position in a different state, but with a major university.
The new job will provide John with a major boost in income and he plans to buy a home before he even gets settled in his new job.
Lenders would look at this as a positive job move because he has been at his current job for longer than 2 years. Also, the new job brings a higher income in a stable field of work.
Same Job with More Money
In a different scenario, suppose a woman named Wanda has worked for a local accounting firm as a tax accountant for 6 years. A bigger firm in a neighboring state calls on her and offers her a 15% raise to do the same job.
Wanda accepts the job and decides to buy a new home within a short drive to her new office.
Lenders will view this change favorably because even though she is brand new to this particular employer, she has the same job responsibilities and a better income from the past few years.
Same Company but Better Job
The easiest transition is staying with the same company and accepting a better position.
For example, if Joseph has worked as a Customer Service Rep in the call center of a large corporation, and he gets promoted to call center supervisor at a different location, this is a no-brainer. He has been promoted by the same company, so he is not missing any time moving from one job to the next. The company is stable and he has moved up in a position with the company.
Job and Work Changes that Lenders will Reject
Now let’s look at some of the changes that lenders will reject for people that are moving to a new state and trying to apply for a home loan
New Pay Structure that Includes Commissions or Bonuses
Many companies like to reward employees by providing them with either a commission or bonus. This gives the employee a chance to earn more money than simply trading hours for dollars.
While this sounds good to both companies and employees, this can be a big red flag to lenders.
If the employee has not earned the commission or bonus for at least 24 months, the lender will not be able to count the income. There needs to be a track record of receiving the commission or bonus to use it for qualifying for a mortgage.
Changing Job Type or Moving to Different Industry
There is nothing wrong with making a change in your employment that will make you more fulfilled and happier. However, lenders do not like to see drastic changes in the types of employment.
Refer to the earlier examples of the baseball coach that took on a similar role at a new college and the tax accountant that took on the same job at a bigger company. Those are common examples of people moving up in their industry and getting recognized for their successful work.
Compare that to a guy named Walt who currently works as a police officer and chooses to walk away from the force and start a job as a used car salesman.
Walt may end up working fewer hours and earning a lot more money. But he will need 2 years at his new job before he can apply for a mortgage.
Changing from Being an Employee to either Consultant, Contractor or Self-Employed
This is by far one of the most common examples of people changing their line of work that causes problems with their mortgage application.
For example, suppose a guy named Taylor has worked for a flooring company for 10 years as a carpet installer. One day, he decides to leave the company and start his own company as a carpet installer, two thousand miles away from his old home. He gets business cards made, talks to all his contacts, and spreads the word about his new company.
Taylor may be a roaring success with his new business. But the fact that he left his stable W-2 employment as a worker and became a business owner will restrict him from getting approved for a mortgage.
He will need to prove with business tax returns as well as personal tax returns that his new company is profitable and pays him enough to afford a mortgage. This will only happen after he has been in business for at least 2 years.
The same could be said for someone that worked as an IT professional and decided to go out on his own as a consultant to his old employer. While he may have the same job, he no longer has the same employee classification since he is now a consultant and a self-employed person.
Documentation is Key
The main thing to keep in mind with these job changes is documentation. Whether you are getting a conventional loan like a Freddie Mac or Fannie Mae loan or choosing a government-backed loan like FHA or USDA, the lenders will want to see everything in writing.
This means that you will need to document your current income with pay stubs, w-2 forms, and personal tax returns.
It also means that you will need to document the new income at the new job. A formal job offer letter will be required. Based on the type of loan as well as any specific lender overlays, the offer letter may need to contain certain verbiage. Your lender can provide you with an example to present to your employer if necessary.
And you may need to provide the lender with your future pay stubs after you receive them.
Summing Up How to Get a Mortgage After Transferring Jobs to Another State
The key takeaways in all of this are fairly clear. If you are taking a better job in the same industry in a new state, and you have a track record of working in that industry over the last few years, you should find your self in a strong position to apply for a new home loan in your new state of residence.
Additional Helpful Mortgage Resources for Home Buyers:
Getting pre-approved for a mortgage is one of the best things you can do prior to looking at houses. Whether you are a first time home buyer or not, this should be priority number one! Take a look at this post by Lynn Pineda to learn everything you need to know about a mortgage pre-approval.
Deciding where to get your mortgage from can be a daunting task for some. Whether it be a bank, credit union, mortgage broker, or somewhere else, this decision could make or break your deal. Take a look at this post by Conor MacEvilly to learn if you should go with a bank or mortgage broker.
If you’re looking for some of the best mortgage tips available, take a look at this post by Bill Gassett. Preparing yourself for the home buying process is key in making the transaction as smooth as possible. Especially for first time home buyers who may not have the knowledge of everything that happens during the process.
Knowing your credit situation before going into what will most likely be one of the largest transactions you ever do, is a smart strategy. Your credit score and profile will help determine what mortgage programs are available and at what rates. If your credit has hiccups, take a look at this post by Paul Sian to learn what you can do to improve your credit score.
About the author: This article on “How to Get a Mortgage After Transferring Jobs to Another State” was written by Luke Skar of MadisonMortgageGuys.com. As the Social Media Strategist, his role is to provide original content for all of their social media profiles as well as generating new leads from his website.
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