When applying for a mortgage, your actions regarding credit score, finances, and employment not only apply to pre-approval but the time between loan processing and closing. Employment and income are two of many major factors affecting your mortgage approval and affordability. With that being said, can you change jobs during the loan process?
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The answer to this question isn't so straightforward as job changes can vary in many ways: hourly, commission-based, salary or self-employed. This is the reason why changing jobs during the loan process is something to be avoided, if possible.
Why Does My Job Matter During the Loan Process?
To complete your loan application, you'll need to provide your lender with various documents about your income and employment, including the last two years W-2's and federal tax returns, last 30 days pay stubs, etc. Self-employed borrowers will need to provide business tax returns and certified Profit & Loss statements, as well.
Your employment status is checked during the processing of your loan and will be checked again before your loan closes. Your home financing is figured on your (and a co-borrower's) income to determine the purchase amount you can finance.
A debt-to-income ratio is relatively uncomplicated to determine if you have a steady, predictable income, but borrowers who have a commissioned or variable income, such as self-employment, often need to provide substantial history of their income to prove a sufficient average over time.
What If You Need to Change Jobs After Applying for a Mortgage?
Sometimes a job change is inevitable. In those cases, transparency with your mortgage banker is extremely important. If you expect your employment or income to change at any point prior to or during the loan process, be upfront with your mortgage lender to avoid any surprises pre-closing and make sure to provide any necessary documentation in a timely manner to keep your loan application moving forward.
For more information about buying and financing a home, download our free Mortgage 101 Handbook, a great resource for first-time homebuyers.