|Using new job or promotion to get mortgage or refinance
Just recently have a job change or receive a promotion? Despite what you might hear, it is still very possible to qualify for a mortgage to buy or refinance a home using your new income.
The lending atmosphere is ripe with misconceptions about job gaps, job changes and occupational changes within the course of an employment time frame. You can get a mortgage if you switched jobs or even changed industries. Do it the right way, and you’ll seal the deal.
In the past, lenders were ready to strike down loan applications where there was a job change or an industry change. Even real estate professionals will tell you don’t change jobs before applying for a loan, and that very well may be the case for most, but it is not black and white.
Hourly employees are under the tightest lending microscope. Why? An hourly employee may have a set full-time schedule, which is ideal for lending purposes. However, if this person works slightly less than a full-time schedule (less than a 40-hour work week with fluctuating hours from week to week), it can muddy the water.
The income gets averaged as long as you’ve been an hourly employee even if you’re making more money now on a per-hour basis. That’s right, if you were making $40 an hour at the new job, and you now earn $50 per hour, the average income over the last 24 months would apply because there is no history of making the higher per-hour wage.
An offer letter, a current pay stub and a detailed description of the compensation structure with a new employer could yield an exception because of a relocation or an alternative circumstance. In either capacity, a most recent verification of employment will bridge the gap between how many hours worked in the year to date supporting federal new ability to repay requirements.
Lenders love this group the most. Why? A set salary offers a streamlined income calculation used in qualifying. If you’re changing from one salaried roll to another salaried role despite a job gap, this should be no problem for qualifying for a mortgage, so long as you can explain any gaps in the last 24 months.
Job gaps, even if you had multiple jobs, all have to be detailed and itemized with dates so there is no gap of employment or if there is, a transitional story is what lender needs. If you have changed jobs from one salary roll to another salary roll with a different title and a different position even within a different industry, that still should be fine for your lender, as you are paid the same way, a flat salaried income.
Salaried with overtime
commissions or bonuses
New job? New salaried role with big commissions, overtime or bonuses? If there is not a history over this additional add-on income, it cannot be counted for use when qualifying for a new loan. Take, for example, that a police officer for the last 24 months has earned overtime plus salary and is changing jobs to become fireman with overtime potential. This can’t be used. It has to have been consistent. A borrower can’t have a history of overtime, change jobs and now have add-on commission income and expect a lender to use 24 months of add-on income when there is a difference. In other words, consistency is key from commissioned role to commissioned role, overtime role to overtime role and so on.
Future promotion or raise
Has it occurred yet? If not, you will be hard pressed to have the lender use projected income, even if it is guaranteed.
If you cannot provide pay stub with year-to-date income, usually a 30-day pay stub depending on your specific lender requirement, along with a letter detailing the change, your loan can’t close. Let’s say, for example, you are searching for the house and you know in the next four months your income is going to be rising $6,000 per month because you’ll have a new role within your respective employer. In order for that $6,000 per month income to be used, you’d have to get the details of the raise, including the role change letter and at least one pay stub.
If consumers are thinking about getting a mortgage, even if it is on the longer-term horizon, opening a dialogue with a lender now may be in their best interests to best guide them through any income bumps the past or future may hold. This especially goes for homebuyers. It cannot be stressed enough how critical it is to get pre-approved with a lender prior to house hunting. This process includes allowing a lender to review your credit, debt, income and assets to assess your qualifying strength.
Scott Sheldon is a local mortgage lender, with over six years of experience helping people purchase and refinance primary residences, second homes and investment properties. Visit him at www.sonomacountymortgages.com.