Starting a new job is an exciting step forward in your career. But if you’re also planning to buy a home, you might wonder how a recent job change could impact your mortgage approval. Lenders consider factors like employment history, income stability, and overall financial health to assess your eligibility.
The good news? A new job doesn’t automatically disqualify you from getting a mortgage. However, understanding what lenders look for and how to strengthen your application can make the process smoother.
Understanding the mortgage application process is important for applicants with a new job. This guide covers how a job change affects your mortgage application, key factors lenders consider, and what you can do to improve your chances of approval.
At Sprint Funding, we make home financing simple—even if you’ve recently started a new job. Contact us today to explore your mortgage options.
Can You Get a Mortgage with a New Job?
Yes, you can still qualify for a mortgage after starting a new job. However, individuals applying for a mortgage after starting new jobs face challenges and considerations due to the perceived risk that lenders associate with these applicants.
While lenders prefer a two-year work history in the same industry, exceptions exist. Lenders may view it positively if your job change results in a higher salary, better stability, or a move within the same field.
Here are common job change scenarios and how lenders typically view them:
- If you switch to a higher-paying role in the same industry, it shows career growth and financial stability, which lenders see as a positive sign.
- If you move from an hourly to a salaried position, it is often seen as an improvement since salaried income is more predictable and stable.
- If your new job includes commission-based pay or bonuses, lenders may need additional documentation or a longer work history to ensure income consistency.
- If you recently became self-employed or switched to contract work, lenders might require two years of income proof before approval.
What Do Lenders Consider for Mortgage Approval?
Lenders evaluate more than just how long you’ve been at your job. Clear communication with your mortgage lender about your job history and stability is important for a smooth mortgage application process.
Here are the key factors that impact your eligibility:
1. Employment History and Stability
Lenders typically prefer borrowers with at least two years of job history in the same field, as it is important for mortgage loan qualifications.
However, if your job change strengthens your financial situation, it may not be an issue. Frequent job changes or employment gaps might raise concerns, so maintaining stability helps.
If you switched jobs recently, gather supporting documents like offer letters, contracts, and pay stubs to show proof of stability.
2. Income Type and Verification
Your income type plays a role in how lenders assess your ability to repay the mortgage.
- Salaried employees are viewed as stable, especially if a base salary is guaranteed.
- Hourly workers must show consistent work hours and a steady pay history.
- Commission-based or bonus income earners typically need two years of earnings history to have these earnings considered as part of their income.
- Self-employed or contract workers must show two years of tax returns to prove income stability.
Lenders evaluate a borrower’s income by calculating the monthly gross pay, often relying on offer letters when traditional income verification documents are not available. Understanding monthly earnings is important to assess borrowing capacity.
3. Avoid Major Financial Moves
Your debt-to-income (DTI) ratio measures how much of your monthly income goes toward debt payments. Lenders prefer a DTI below 43 percent to ensure you can manage mortgage payments alongside existing financial obligations.
Lenders assess different types of income as qualifying income when evaluating borrowers for loans, considering factors like employment status, self-employment, and part-time jobs.
For example, if your monthly debt payments are $1,500 and your gross monthly income is $5,000, your DTI is 30 percent, which is well within the approval range.
If your new job increases your income, it may lower your DTI and improve your mortgage eligibility.
4. Credit Score and Financial Health
A strong credit score makes mortgage approval easier and helps secure lower interest rates. Most lenders require a minimum credit score of 620 for conventional loans, though higher scores can unlock better rates.
A strong credit score is important for mortgage loan approval, as it demonstrates financial responsibility and reliability to lenders.
Ways to improve your credit before applying:
- Pay down existing debts to reduce your credit utilization.
- Make all payments on time to avoid negative marks.
- Check your credit report for errors and dispute inaccuracies.
Maintaining good financial habits can strengthen your mortgage application.
How to Improve Your Mortgage Approval Chances with a New Job
If you recently changed jobs and are applying for a mortgage, here’s how you can improve your approval odds.
Stable employment and consistent income are critical factors lenders consider during the mortgage application process, and changing jobs can jeopardize a borrower’s chances of securing mortgage loan approval.
1. Choose the Right Lender
Not all lenders have the same approval standards. Some are more flexible with job changes than others. Mortgage lenders examine employment history, income levels, and various financial factors to determine eligibility for mortgage loans, and job changes can significantly impact mortgage approval. A mortgage broker or lender familiar with employment transitions can help you find the best options.
2. Gather Strong Documentation
Lenders may require additional documents to verify your employment and income. A recent pay stub is important as it serves as a key verification tool for income stability.
Be prepared to provide:
- An offer letter and employment contract
- Recent pay stubs
- Bank statements showing direct deposits
- W-2s or tax returns for income verification
If your new job includes commission-based income, a lender may request previous tax returns to verify earnings consistency.
3. Avoid Major Financial Moves
Taking on new debt or making large purchases before closing on a home can impact your approval. Avoid new car loans, applying for new credit cards, or making major purchases on existing credit lines.
Making a substantial down payment can eliminate the need for private mortgage insurance, thereby reducing the overall cost of the mortgage and addressing lenders’ perceived risk associated with borrowers in new employment situations.
Keeping your financial situation stable until your mortgage closes is the best approach.
4. Consider Waiting for Job Stability
If you are switching jobs, especially if your new position includes a probationary period or inconsistent pay, waiting a few months before applying could improve your mortgage eligibility. Once you have a few steady paychecks, lenders may view your application more favorably.
Special Considerations for Self-Employed Borrowers
Self-employed applicants face stricter requirements because their income varies. Lenders typically require two years of tax returns to verify earnings.
Self-employed borrowers need to demonstrate a history of steady income, as lenders are becoming more adaptable and focus on the applicant’s ability to show consistent and reliable earnings.
Tips for self-employed mortgage approval:
- Keep detailed financial records to show steady earnings.
- Lower business deductions on tax returns to reflect higher net income.
- Maintain consistent client contracts to show stable work.
Lenders want to see consistent, verifiable income before approving self-employed borrowers.
Secure Your Home Loan with Confidence—Even with a New Job
Getting a mortgage with a new job is possible with the right preparation. Lenders look at job stability, income reliability, and financial health when reviewing applications. By maintaining steady employment, managing your debt, and providing strong documentation, you can increase your chances of approval—even after a recent job change.
At Sprint Funding, we understand that every borrower’s situation is unique. Our team is here to guide you through the mortgage process and find the best loan options that fit your needs.
Have questions? Call us today to discuss your mortgage options.