Getting a Mortgage With a New Job: How the Process Works
Congratulations, you just made a new career move. But what are your chances of getting a mortgage while or just after switching jobs?
While getting a mortgage with a new job can be a bit more complicated than applying with a long employment history, it’s definitely possible. Lenders typically like to see a steady two-year employment history, but there are several other ways to demonstrate you’re financially prepared to take on a mortgage.
Read on to learn what lenders require when you’re buying a house while starting a new job.
- Most lenders prefer to see a stable two-year employment history and consistent income, but a recent job change doesn’t necessarily disqualify you.
- Be prepared for extra scrutiny and be ready to provide additional documentation.
- The best place to start is by having an open conversation with your lender about your circumstances.
Can you get a mortgage with a new job?
One of the key factors lenders consider when evaluating you for a mortgage is whether you have a stable, reliable source of income. In general, mortgage lenders like to see at least two years of steady income and employment to help demonstrate your ability to make your mortgage payments.
That doesn’t mean you have to put homebuying on hold if you’ve recently started a new job or are in the process of changing positions. There are ways to qualify for a mortgage, but you have to be prepared to navigate a little extra red tape during the underwriting process.
The best place to start is to have an open conversation with your lender. They can review your employment situation, explain any requirements from your mortgage loan program and let you know what it will take for you to qualify for a mortgage.
| Employment scenario | Likelihood of mortgage approval |
|---|---|
| Starting an entry-level position as a recent college graduate | Good |
| Starting a new salaried position in the same industry | Good |
| Earning a promotion with a salary increase | Excellent |
| Becoming self-employed after exiting a salaried position | Challenging |
| Established self-employment | Good |
| Hourly position | Fair |
Not sure who can help? Check out our guide on how to choose a mortgage lender.
How mortgage lenders consider different types of income
In addition to your employment history, lenders will verify the amount of income you earn in order to make sure you can afford your mortgage payments. Depending on how your income is structured, the calculations may vary.
Annual salary
Annual salaries are the easiest type of income for a lender to verify. In most cases, the lender will do their due diligence by asking for a verification of employment (VOE), a recent pay stub and at least one year of W-2s. If you’re just starting a new position, however, they may ask for a signed offer letter.
To determine how much you can afford to borrow, your lender will calculate your monthly gross income by dividing your annual gross income (before taxes and any applicable tax deductions) by 12.
Hourly income
The documentation requirements for hourly wages are the same as for annual salaries. However, because hourly employees may work different numbers of hours each week, your monthly income is calculated differently:
(Hourly gross pay x Average # of hours worked per week x 52 weeks) / 12 months
Variable income (bonuses, overtime, commissions, etc.)
Lenders look for consistency in the loan approval process, which is why getting approved for a mortgage with a variable income structure is a bit trickier.
That said, it can be done — you may just need to provide a bit more documentation explaining how your income is structured. As a rule of thumb, you’ll ideally need a completed verification of employment form, a recent pay stub and two years of W-2s.
To calculate variable income, the lender will take an average. They’ll also consider the trending amount of the received income, payment frequency and the history of receipt.
Note: The process for getting a mortgage while you’re self-employed is a bit different because self-employment income often fluctuates from year to year. In that case, income verification will rely heavily on your personal and business tax returns.
How to handle switching jobs while applying for a mortgage
While the exact requirements can vary, here’s an overview of what you can do to increase your chances of getting approved for a home loan while switching jobs.
Have the necessary documentation ready
Traditionally, lenders look at W-2s or tax returns to verify employment during the mortgage process, but if you’re just getting started in a new position, you may not have those on hand for your new role. In that case, in addition to pay and tax documents from your previous job, your lender will likely also ask to see the following documents:
- Offer letter: Many lenders require a signed offer letter. The offer letter must be signed by both you and your future employer and include the specifics of your employment, such as your position, salary and start date, which must occur within 90 days of your conventional mortgage closing date. Plus, if your job offer is contingent on anything, you must be able to show that you’ve satisfied those conditions prior to closing.
- Pay stubs: If available, pay stubs supporting the level of income outlined in the offer letter should be provided.
- Letter of explanation: In some cases, you may be asked to submit a letter of explanation to the lender. This allows you to explain why you are changing positions and provide more information about your financial situation.
Prepare for a little extra scrutiny
In addition to reviewing the above documentation when you apply for a home loan, many lenders will go a step further and conduct a VOE. During the VOE, the lender will reach out to your employer directly to request verbal or written confirmation of your employment and intent for it to continue.
Documents you’ll need when applying for a mortgage with a new job
- Signed offer letter
- Recent pay stubs
- W-2s
- Tax returns
- Verification of employment
- Letter of explanation (if requested)
4 tips to boost your mortgage approval chances with a new job
- Talk to your lender. The best first step is to have an open conversation with your lender. Explain your situation and ask for their guidance on how to best proceed.
- Gather the necessary documentation. All mortgage applications require documentation. You may need to gather additional forms if you’re applying for one while switching jobs.
- Strengthen other aspects of your finances. Lenders look at numerous factors when it comes to mortgages. Things like improving your credit score and lowering your debt-to-income ratio can make you a stronger candidate.
- Be flexible with your timeline. While it’s possible to get a mortgage while switching jobs, it’s not guaranteed. You may have to put your plans on hold until you’ve been in your job a bit longer.
Frequently asked questions
Yes, you can use a job offer as proof of income for a mortgage with some loan programs. However, it has to meet certain specifications. It may need to be supported by a pay stub and/or verification of income.
Yes, the Federal Housing Administration (FHA) allows future income — including income from a new job — as long as the income is received within 60 days of closing on the mortgage. You must also have sufficient cash reserves to cover your mortgage payments until the income is received.
You can switch jobs after getting a mortgage preapproval, but it’s likely to complicate things. The bank based your approval on the income from the job you reported while applying. Changing jobs may delay the process and may require the lender to reevaluate your application.
Ideally, lenders like to see a stable two-year employment history when approving you for a mortgage. However, it’s possible to get approved with a shorter employment history, as long as you can provide the appropriate documentation.
Yes, it can. Lenders look for stable and dependable income, and ideally like to see two years of employment in the same industry. Getting approved for a mortgage after changing industries can be done, but it may be more difficult and require additional documentation.
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