Can I change jobs while buying a home?
It’s quite exciting and can also be overwhelming when applying for a home loan especially if you are looking at a career change at the same time. During your application process or when speaking to a mortgage broker, you should let them know if you are changing jobs or making a career change as your employment status and income are important factors during the application process. Any changes to your employment can affect your home loan application as lenders look at your income to determine whether you can make the mortgage payments on time.
Here are some key points to keep in mind:
- A mortgage broker will typically ask for information about your employment status, income, and job history if you have only been in your current role for a short period of time, when you apply for a mortgage.
- It is likely you will also get asked for information about your potential new job, including your new salary, the length of your employment contract, probation periods and whether or not the job is in the same field as your previous job.
- If your new job pays less, your mortgage broker may require you to provide additional documentation to ensure you will be able to continue making mortgage payments.
- If you don't inform your mortgage broker of a job change, it could lead to a default on your mortgage and negatively impact your credit score.
Impact of Job Change on Mortgage Application
Here are a few ways a job change can affect the mortgage application process:
- Income Verification: Your income is one of the most important factors considered by lenders and mortgage brokers when applying for a mortgage. A change in employment can affect your income, and if your new job pays less than your previous job, it can be difficult to qualify for a mortgage or may require you to provide additional documentation to verify your repayment stability.
- Job Stability: Lenders and mortgage brokers want to ensure that you have a stable job and are likely to continue making mortgage payments. A change in employment can raise questions about your job stability and may make it more difficult to qualify for a mortgage.
- Length of Employment: Some lenders prefer if you have held you current job for at least 3 months or passed the probationary period before you can qualify for a mortgage. If you change jobs during the mortgage application process, it could potentially delay the approval of your mortgage application if you don't meet this requirement.
The types of employment that may be viewed as stable by lenders
Lenders typically view certain types of employment as stable when evaluating a mortgage application. These types of employment are generally considered to have a lower risk of job loss and a higher likelihood of the borrower being able to continue making mortgage payments.
Here are some types of employment that may be viewed as stable by lenders in Australia:
- Permanent full-time employment: This type of employment generally offers the most stability and is typically viewed as the most favorable by lenders. Permanent full-time employment is considered a long-term commitment between the employee and employer, and it offers a steady and reliable source of income.
- Self-employed: Self-employed individuals may also be considered as stable by some lenders, as long as they can demonstrate a consistent income and a good credit history. Some lenders may require more documentation to verify income for self-employed individuals than for salaried employees.
- Permanent part-time employment: Some lenders will also consider permanent part-time employment as stable. This type of employment is considered a long-term commitment between the employee and employer, and the income may be lower than that of a full-time employee. Securing a loan on a low income could still be an option to consider.
- Public sector employment: Public sector employment, such as jobs with the government or a government-owned corporation, may also be viewed as stable by lenders. This is because the risk of job loss is often considered to be lower in the public sector, and the jobs are typically considered to be more secure than those in the private sector.
Keep in mind: Every lender has its own policies, and therefore, it's best to check with the lender for their specific requirements and policies regarding stable employment.
Tips for Securing a Loan While Job Hunting
If you're currently job hunting, it can be more challenging to secure a loan. But there are still steps that you can take to show lenders that you have a stable income. One option is to provide proof of severance pay or unemployment benefits. Another option is to show that you have savings that can cover your mortgage payments for a certain period of time.
- Show that you have a solid plan for your job search and that you're actively pursuing employment
- Highlight any job offers or interviews that you have lined up
- Explain that you're looking for a job in the same field that you're currently employed in, which will help to demonstrate stability and continuity of income.
Strategies for Balancing the Home Buying Process with a Career Transition
Navigating the home buying process while also going through a career transition can be tricky, but could be possible depending on your individual circumstances. Here are some strategies that could potentially help you balance both:
- Be honest: It’s best to be transparent and upfront with your mortgage broker, lender, and other professionals involved in the process about your job search.
- Have a plan B: Include contingencies in your purchase contract related to employment. This can include a contingency that you'll only buy the home if you're employed by a certain date.
- Communication is key: Make sure you communicate with your lender about the status of your job search and provide any updates as soon as possible.
Tips for Making the Transition: Providing tips for making the transition from one job to another while buying a home.
- Timing is key: Try to time your job change so that it occurs during the early stages of the homebuying process. This will give you more time to navigate the mortgage approval process and minimize the impact of the job change on your application.
- Communicate with your broker: Keep your broker informed of your job change and provide them with documentation of your new employment. This will help them understand your financial situation and make a more informed decision about your mortgage application.
- Have a solid financial plan: Having a solid financial plan in place can help mitigate the impact of a job change on your mortgage application. Make sure you have a stable income and a good credit score, as well as a good down payment, to increase your chances of approval.
- Get pre-approved: Consider getting pre-approved for a mortgage before making the job change. This will give you an idea of the loan amount you qualify for and can help you set a realistic budget for your home purchase.
- Be prepared to answer questions: Be prepared to answer questions about your job change during the mortgage approval process. Be prepared to provide documentation of your new employment, such as a letter from your new employer or a recent pay-slip.
- Consider a co-signer: If your new job doesn't have as much stability as your previous one, consider having a co-signer to help you with the mortgage approval process. A co-signer can help mitigate the risk for the lender and increase your chances of approval.
Need assistance? Be connected to up to 3 mortgage brokers to discuss your options.
If you are on the cusp of buying a home and making a career change at the same time, -or- if you have an existing mortgage and are thinking of changing jobs and want to speak to a mortgage specialist, Joust can help. With Joust Instant Match you can be instantly connected with up to 3 our our partner brokers who can offer you advice specific to your individual need's as well as provide you with the most competitive home loan rates in the market. Give Joust Instant Match a go today.
*The information contained in this article is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Joust recommends that you consider whether it is appropriate for your circumstances. Joust recommends that you seek independent legal, financial and taxation advice before acting on any information in this article.