The Effect of Changing Jobs
How Changing Jobs Affects Buying a Home
For most people, changing
employers will not really affect your ability to qualify for a mortgage loan.
For some homebuyers, however, the effects of changing jobs can be disastrous to
your loan application.
Salaried Employees
If you are a salaried employee
who does not earn additional income from commissions, bonuses, or over-time,
switching employers should not create a problem. Just make sure to remain in
the same line of work. Hopefully, you will be earning a higher salary,
which will help you better qualify for a mortgage. Call Dale for condo on the
Pinehurst golf course.
Hourly Employees
If your income is based on
hourly wages and you work a straight forty hours a week without over-time,
changing jobs should not create any problems.
Commissioned Employees
If a substantial portion of
your income is derived from commissions, you should not change jobs before
buying a home. This has to do with how mortgage lenders calculate your income.
They average your commissions over the last two years.
Changing employers creates an
uncertainty about your future earnings from commissions. There is no track
record from which to produce an average. Even if you are selling the same type
of product with essentially the same commission structure, the underwriter
cannot be certain that past earnings will accurately reflect future earnings.
Call Dale for condos on Pinehurst golf course.
Changing jobs would negatively
impact your ability to buy a home.
Bonuses
If a substantial portion of
your income on the new job will come from bonuses, you may want to consider
delaying an employment change. Mortgage lenders will rarely consider future
bonuses as income unless you have been on the same job for two years and have a
track record of receiving those bonuses. Then they will average your bonuses
over the last two years in calculating your income. Call Dale or Cathy for
property on
Lake Pinehurst.
Changing employers means that
you do not have the two-year track record necessary to count bonuses as income.
Part-Time Employees
If you earn an hourly income
but rarely work forty hours a week, you should not change jobs. There would be
no way to tell how many hours you will work each week on the new job, so no way
to accurately calculate your income. If you remain on the old job, the lender
can just average your earnings.
Over-Time
Since all employers award
overtime hours differently, your overtime income cannot be determined if you
change jobs. If you stay on your present job, your lender will give you credit
for overtime income. They will determine your overtime earnings over the last
two years, then calculate a monthly average.
Self-Employment
If you are considering a
change to self-employment before buying a new home, don’t do it. Buy the
home first.
Lenders like to see a two-year
track record of self-employment income when approving a loan. Plus,
self-employed individuals tend to include a lot of expenses on the Schedule C
of their tax returns, especially in the early years of self-employment. While
this minimizes your tax obligation to the IRS, it also minimizes your income to
qualify for a home loan. Call Dale or Cathy for Pinewild Real Estate.
If you are considering
changing your business from a sole proprietorship to a partnership or corporation,
you should also delay that until you purchase your new home.
This site was developed to
provide information on Pinehurst real estate including Pinehurst Golf
and Waterfront homes, Pinehurst condos, and Pinehurst and Southern Pines
Commercial real estate.
Coldwell Banker United Realty
Dale
Heck – Realtor/Broker
910-528-4652
Cathy Bason – Realtor/Broker
910-528-5244
