Employment During Mortgage Process

Switching Employment During Mortgage Approval Process

ByGustan Cho
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This BLOG On Switching Employment During Mortgage Approval Process Was UPDATED On January 31st, 2019

Income and employment is probably the most important factor, along with credit, in the mortgage approval process.

  • Mortgage lenders want to be assured borrowers have a stable income and stable employment
  • Lenders need to be assured that income will likely continue for the next three years
  • That is the reason lenders want to see a two-year employment history and stable income
  • Steady two-year employment history with a stable income is a good prediction that income and employment will continue for the next three years
  • Unfortunately, this is not always the case for mortgage loan borrowers

Mortgage Guidelines On Employment History

Many borrowers think that they need a two-year employment history with the same company to qualify for home loans.

  • They are also under the belief that gaps in employment are not allowed in the past two years
  • There are lenders who do have their own mortgage lender overlays in gaps in employment
  • Many lenders require a two-year consistent employment history with the same employer
  • But this is not always the case to qualify for government and/or conventional loans.
  • Borrowers can qualify for a residential mortgage loan with gaps in employment and multiple employers during the past two years

Qualifying For Mortgage With Gaps In Employment

Borrowers can qualify for a mortgage with gaps in employment in the past two years.

Here are the rules:

  • Unemployed for less than 6 months: 
    • Borrowers unemployed for less than six months or have taken a leave of absence for less than six months can qualify for a mortgage once they start a new full-time job
    • Need offer letter of employment
    • Need 30 days paycheck stubs after returning to work with a new job or same job prior to clear to close
    • Borrowers who got a new job in a totally different field can qualify with a gap in employment (6 months or less) with no seasoning requirements with an offer employment letter
    • The lender will want to be convinced that new employment will likely to continue and will require verification of employment
  • Unemployed for more than 6 months: 
    • Borrowers unemployed for more than six months need to be employed on their new full-time job for at least six months
    • Need employment offer letter
    • 30 days paycheck stubs before mortgage underwriter can issue clear to close
  • Taken time off for an extended period of time: 
    • Borrowers who took time off work for an extended period of time, more than 6 months, from the same employer, due to medical or other reasons, then lenders will require a letter of explanation and 30 days worth of paycheck stubs
    • No seasoning requirement when getting back to original full-time employer

Switching Employment During Mortgage Approval Process

Changing employment during mortgage approval process happens from time to time.

  • Switching employment during mortgage approval process will delay closing mortgage loan
  • If a person is intending on changing jobs and have notified employer prior to verification of employment, this can pose an issue:
    • If employee told that they are quitting and do not intend on leaving until after they close on their home, this will create a problem and mortgage loan approval can be revoked
    • One of the questions asked on verification of employment is if the employee employment is likely to continue for the next three years
    • If borrowers already told Human Resources that they will be retiring or given two weeks notice, the verification of employment will not be valid
    • No lender will clear verification of employment on a borrower that has given a termination notice
  • Borrowers need to realize that mortgage lender will do a verification of employment
  • Even though they are employed there and will be until the home has closed, one of the most important questions they will ask is the status of the likelihood that employment will continue for the next three years
  • Prior to closing, many lenders will do a final verbal verification of employment
  • When the lender asks the HR spokesperson about the likelihood of employment, they will respond that you turned in resignation and last day will be a certain date
  • This will kill mortgage approval
  • What happens on cases like these is that borrowers need to wait until they start a new job and get lender 30 days worth of paycheck stubs and written verification of employment

Home Buyers or Homeowners who need to qualify for a mortgage with a direct lender with no mortgage overlays on government and conventional loans can contact us at Gustan Cho Associates at 800-900-8569 or text us for faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.

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