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Home Buyer Tips: Changing Jobs |
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Home buyer tips. If you are looking to change jobs, you may want to think twice. It can effect your income that the lender will use in figuring what home price you can afford. |
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| Tips For Home Buyers: Changing Jobs |
For most people, changing employers
will not really affect your ability to
qualify for a
mortgage loan,
especially if you are going to be earning more money. For some homebuyers,
however, the effects of changing jobs can prove to be harmful to
your loan application, and
how much your lender will qualify you for.
If you are a salaried employee who does not earn additional income
from commissions, bonuses, or over-time, switching employers should
not create a problem. Just make sure to remain in the same line
of work. Hopefully, you will be earning a higher salary, which will
help you better qualify for a mortgage.
If your income is based on hourly wages and you work a straight
forty hours a week without over-time, changing jobs should not create
any problems.
If a substantial portion of your income is derived from commissions,
you should not change jobs before buying a home. This has to do
with how mortgage lenders calculate your income. They average your
commissions over the last two years.
Changing employers creates an uncertainty about your future earnings
from commissions. There is no track record from which to produce
an average. Even if you are selling the same type of product with
essentially the same commission structure, the underwriter cannot
be certain that past earnings will accurately reflect future earnings.
If a substantial portion of your income on the new job will come
from bonuses, you may want to consider delaying an employment change.
Mortgage lenders will rarely consider future bonuses as income unless
you have been on the same job for two years and have a track record
of receiving those bonuses. Then they will average your bonuses
over the last two years in calculating your income.
If you earn an hourly income but rarely work forty hours a week,
you should not change jobs. There would be no way to tell how many
hours you will work each week on the new job, so no way to accurately
calculate your income. If you remain on the old job, the lender
can just average your earnings.
Since all employers award overtime hours differently, your overtime
income cannot be determined if you change jobs. If you stay on your
present job, your lender will give you credit for overtime income.
They will determine your overtime earnings over the last two years,
then calculate a monthly average.
If you are considering a change to self-employment before buying
a new home, don't do it. Buy the home first.
Lenders like to see a two-year track record of self-employment income
when approving a loan. Plus, self-employed individuals tend to include
a lot of expenses on the Schedule C of their tax returns, especially
in the early years of self-employment. While this minimizes your
tax obligation to the IRS, it also minimizes your income to qualify
for a home loan.
If you are considering changing your business from a sole proprietorship
to a partnership or corporation, you should also delay that until
you purchase your new home.
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