There are quite a number of steps to buying a home. Among these definitive steps includes having a stable source of income. Your financial status is a significant requirement that is essential when applying for a home loan and getting your mortgage approved. Having a strong employment history and a steady source of income determines the ability of a homebuyer to purchase a real estate property.
But what if you are currently transitioning from one job to another while buying a home? What if you are relocating to a new job, in a new place, and would want to avoid the hassles of renting? Will you qualify for a mortgage?
Getting a Mortgage with a New Job
Whether you are a first-time homebuyer or a seasoned homeowner looking to relocate, getting a mortgage while moving into a different job can be quite challenging. The experience itself can be overwhelming and your mortgage qualification can hang in a balance.
Buying a home requires financing lenders. Lenders will look into your employment income to assess whether you qualify to pay for a loan. Ideally, a standard mortgage application requires two-year of work history. The longer you are in your current job, the better.
If you are currently less than two years in your current position, you can still qualify for a mortgage. However, your employment history can be a valuable asset for lenders to consider for a loan. Here’s what most lenders will look for:
- Qualifications and training
- How often do you change jobs
- The health of your industry and current company
- Increases in pay and job responsibilities
- Work history in the related field
- Unemployment history
- Jobs that match your pay and training
Changing jobs while in the middle of a mortgage application can raise questions. But, as long as your current job doesn’t have a termination date, lenders will consider your employment as ongoing and permanent.
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Documents to Prepare to Qualify for Mortgage
Whether changing jobs or not, a homebuyer needs to prepare financial documents to qualify for a mortgage.
Underwriters will be looking into your employment and income, to determine your capability to repay a loan. A two-year work history is a usual requirement most lenders will look for from a potential home buyer.
W-2s
The W-2 is a form given to each employed individual to fill up. It is sent to Social Security along with the W-3 or the Transmittal of Income and Tax Statements. Employers files an employee’s W-2 for wages paid to the employee. Information such as income and the amount of federal, state, and other taxes withheld from your paycheck. The form will most likely give your lenders an idea of how much disposable income you have.
IRS Form 1040
The IRS Form 1040 is an official document available for U.S. taxpayers used in filing their annual income tax returns. Data included in form 1040 includes the U.S. Citizen’s income and deductions. These numbers help determine the amount of tax a person owes or if they are entitled to receive a refund. To get a copy of your 1040, a taxpayer can request it via phone (800-908-9946), or through the mail.
Federal and Income Tax Returns
Federal and income tax returns are two different things but are similar in the sense that they apply a percentage rate to a person’s taxable income. The rates and how it is applied are completely different but is essential in determining how much obligation a person owes from the government as well as how much disposable income is left to them. It shows if you are meeting your obligation to the U.S. government.
Recent Pay Stubs
Records of your current income stubs are documentary proof of how much you are actually making. When buying a home, your income determines two things – whether your income is qualified to repay a loan and the mortgage amount that is suitable for your financial capacity to pay.
VOE from Current Employer
Verification of employment (VOE) is required to give lenders access to personal information such as your job position, income, and job stability. Most of the time, lenders will do a last-minute check to verify this information, through a call, to detect fraud and prevent a lender from funding a loan you are not capable of repaying. Lenders need to verify continued employment to determine the likelihood of future-proofing your capacity in repaying a loan.
Securing a mortgage is not only the first step but is also the most crucial step to buying a home when moving jobs or relocating. Unless you are capable of paying in cash, you will have to provide more information to determine your financial capability in repaying a loan.
So How Can You Qualify for a Loan When Moving Jobs?
Getting a mortgage when changing jobs is possible, but can be quite complicated. Mortgage preapproval is a strong guarantee and requirement to secure the purchase of your dream home. However, if you change jobs or relocate somewhere far from where your workplace is, additional documents will be required. A bank needs your employment’s guarantee that they understand your long-distance working arrangement. Moving to a new job requires proper documentation too.
Although there are acceptable job changes that make it possible to get a mortgage while transitioning into a new job. Moving to a job in the same industry but with a higher income is quite favorable considering an increase in income will be viewed beneficial when applying for a mortgage. However, this is only true for stable industries and if a homebuyer does not change jobs frequently. The same applies to moving onto the next level of your career. The increase in pay is favorable, if and only if the source of income is reliable and stable.
It is best to talk to a lender, or your trusted realtor before making a move. A seasoned real estate agent can help you handle such circumstances with expertise and experience. Call Elizabeth Fenderson Real Estate today. Let us help you take a step further to purchasing your new home.