The Mortgage Brothers Show
Getting a Mortgage During a Job Transition
In this episode, we’re covering everything you need to know about getting a mortgage during the time of a job transition. Whether you’re relocating to a new town for a job, or are simply in the process of purchasing a new home in your city. We’ll share everything you want to know about how a new job can affect a new mortgage.
What’s the big deal about a new job?
With new opportunities, come unknown variables. You may think “what’s the big deal about a new job,” it really is a big deal because when you boil everything down, it’s brand new. How does the brand new aspect of a job affect a mortgage? Let’s talk about the types of new jobs that people get, and how it can influence your mortgage. There are easy scenarios, hard scenarios, and completely, you know, unique ones.
Moving to a Job with Decades of Experience:
A borrower of ours is an engineer, he had employment with Raytheon and was working with them for 18 years. He called wanting to get pre-call for a home and was just stressed. “Hey, Tom, I’m all stressed. I got this and this new job, right? I want to buy a house. I can’t believe it. It’s with General Dynamics. You know, I’m making, you know, a hundred thousand per year”. I ask, “how long have you been, you’ve been doing what you’re doing.” He says about 20 years. I said, are you doing anything different? And he’s like, no, it’s the exact same thing. From a lender’s perspective, it’s as if there’s no change. This is the easiest type of job change with someone that has as much history and is as consistent as that, no issue whatsoever.
That’s easy, new job. You call us, you call us with a situation like that, where you’ve been an engineer 20 years, that is low, low risk for the bank. The bank is like, “Hey, no problem. Just give me the offer letter from the new employer and the loan, make sure that you start the job at least before your first payments.” So he’s probably the only thing. So people in a situation like that, where it’s very easy, very low risk, the banks are allowing you to purchase your new house, right.
Multiple Job Moves in a Two Year Period:
Let’s say a borrower calls, and they’re getting a new job right now. Let’s just say with Enterprise Car Rental and they are going to get paid a salary, but they’ve said they’re going to be starting that job very soon. But they were just working at an auto company for four months before that at Checker Auto Parts. They’ve only worked for Checker for four months before that, they had a two-month gap. And before that, they were working at the local carwash. This person’s getting a salary now which is great, but you can already tell this history isn’t’ consistent. Two years of consistent employment is what’s really needed when you look at the last two years, there’s a lot more risk on this.
It is not easy for a lender to say, yes this is easy. What we were going to say to a borrower like that is we want to see that you can be on the job for at least 60 days. We could do the loan potentially with 30 days of pay stubs. But, I think that we should be realistic if you’re listening to this and you have a new job, and you’ve had a situation where you have had more than two jobs in the last two years, be prepared to prove you can stay on at your new job for 30 to 60 days and show us those papers.
We have people that are coming from, you know, a couple of part time jobs that move into full time. Those that move from full time into a couple of part time jobs. There are new jobs out there that really is, you know, can be complicated because of the timing and how they interweave together. But one of the big things is, there’s going to be the easiest scenario, and then we’re complicated.
More tricky is when we get a call-up and say, guess what? I just, I just got a new job. I’m starting my own business. I’m so excited. I’m paying myself 80,000 a year and I’m ready to get that mortgage. For us, bells are going off all over the place. With someone who has become self employed so that this job change is actually going from W2 to employment to self-employment, which also could be 1099. What are we telling our borrowers when that happens? It immediately puts them in limbo for two years of tax returns. We’re basically saying you have to sit tight, be profitable for two of tax returns, show the IRS, you make money.
Then we can talk about getting a loan in some cases one year, but to be safe we say two. And, the two year period makes sense to a lot of people. You know, you, it’s a trial period, you know, it’s like being at the rodeo and you know, if you can hang on to that horse for at least 15 seconds, there’s a good chance that you’re going to be able to hang on to that horse again in the future. So stay at that job or there’s stability for a couple of years, then there’s very, you know, it’s very likely that you’re going to have future stability, but here’s a really interesting scenario that happens.
Someone calls me, they’ve been a doctor for 20 years. They say, right, I’ve been a physician for 20 years. I’m just going to start my own business as an orthopedic surgeon. I have my own clients. I mean, it’s going to be easy to transition. Yeah. And in many ways, they’re right. I’m going to make more money. I have all my clients set up the moment he goes, self-employed no matter how great his chances are of succeeding. The bank will not give him a loan. Okay. So it doesn’t matter how easy or how much you try to convince the bank.
In this case, you may decide it’s easier to go back to being a W2 employee. No problem. It’s when you go from self-employed to W2 wages. It’s basically like you’ve been a W2 employee the entire time. To go the other way is a piece of cake, and we’ve actually talked about how many borrowers have done this. I bet you there’s at least a few where they’ve gone so far self-employed, and after realizing the hurdles are gonna have to overcome, they actually go back to W2 employment to buy the house.
Thanks for listening and reading the Mortgage Brothers Show. Let us know if you have any questions you’d like us to answer on this podcast. You can email your questions to Tom@AZMortgageBrothers.com or Eddie@AZMortgageBrothers.com.
Be sure to ask us for a free quote on your next mortgage. We’ll personally work with you and help you through the whole process.
Signature Home Loans LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Signature Home Loans NMLS 1007154, NMLS #210917 and 1618695. Equal housing lender.