How a New Job Can Affect a Mortgage Approval


A mortgage lender doesn’t lend money until an applicant can prove their work history. This is why lenders request copies of past tax returns and recent paycheck stubs before approving home loan applications. But getting approved for a mortgage involves more than having a job — you need stable employment. And unfortunately, getting a new job or starting a new career can jeopardize a mortgage approval.

If you’re pre-approved for a mortgage, a major change to your employment status can postpone or possibly cancel the loan. Even if you don’t have an employment gap and there’s a seamless transition from one job to another, any change will prompt your lender to take a second look at your application. The bank will verify your new employment and they’ll need to confirm that your income can support the mortgage.

A job switch might not stop a mortgage, but it will slow the process. Ideally, you should avoid any employment changes until after the mortgage closing. But if you find yourself job hunting after getting pre-approved, here are a few tips to protect your approval.

Find a Job in the Same Field

Mortgage guidelines vary from lender-to-lender. Some banks not only require two-years of consecutive income, they also require two-years of employment with the same employer or in the same field. If you get a new job after you’re pre-approved, the lender may be okay with the switch as long as you’re working in the same field. But you could run into problems if you’re starting a new career.

Since this is a new field for you, there may be a probationary period where your new employer can terminate your job if you’re not a good fit. How would you pay the mortgage if this were to happen? A new career can raise questions and put doubts in the lender’s mind, which can make is harder to qualify.

Make Sure Your Income Remains the Same or Increases

If you have to switch jobs after getting pre-approved for a mortgage, make sure your income remains the same or increases. If your new job pays less, the lender will reassess affordability. You may still qualify for the mortgage, but you’ll likely qualify for less money. In addition, the way you’re paid should remain the same. If you were pre-approved as a salary employee, but you’re now an hourly or commission-based employee, the lender might question whether you can afford the mortgage because your income may fluctuate from week to week. The bank will request additional information from your new employer and your most recent paycheck stub to get an idea of your expected earnings. If the lender isn’t confident in your ability to make the payment, the bank will cancel the mortgage.

Don’t Start Your Own Business

If you lose your job after getting pre-approved for a mortgage, this isn’t the time to take a leap of faith and start your own business. Even if you’re starting a business in a field you’re familiar with, a mortgage lender will not lend funds for a home purchase. It’s much harder to get a mortgage when you’re self-employed. Qualifying as a self-employed buyer will require at least two years of profitable tax returns. If you don’t want to jeopardize your mortgage approval, it’s important to find employment as soon as possible, preferably within the same field and earning the same income, and then transition into self-employment after closing on the mortgage loan.