How it can affect you
The effects of changing employers can be disastrous to your loan application.
Did you know… Lenders like to see a minimum 2 year history of employment, an established bank account, and of course – a good credit history.
Self-employed individuals typically include a good deal of expenses on the Schedule C of their tax returns, although this minimizes their tax obligations to the IRS, it also minimizes their overall gross income figures.
If you are already self employed and considering changing your business status from a sole proprietorship to a partnership or corporation, you should also hold off until after the purchase your new home.
People who earn a salary (fixed compensation for services)
Will you be earning a higher salary by changing? (potentially better qualifying you for a new home mortgage loan.) If you are uncertain, then perhaps you should wait.
Switching employers may not create a problem.
People whose income is based on hourly wages who work a 40 hour week (with no over-time earnings)
Lenders like to see a consistent flow of income and preferably a solid work history.
Changing employers poses little to no affect.
“Part-Timers” (those earning an hourly income but rarely working 40 hours per week)
A lender can better calculate your income by averaging your history of earnings in your current job.
Seriously reconsider before you change employers.
Changing employers can create an uncertainty about future commission earnings. It will show no solid history of earnings from your new new employer which a lender can produce an average.
Lenders like to see a 2 year history of commission earnings in calculating an average income for those commission based employees. Changing jobs potentially could negatively impact your ability to purchase a home.
Rethink changing employers before purchasing a home.
Employers generally pay overtime earnings differently, the employees overtime income cannot be determined if they change employers.
The lender will determine your overtime earnings by calculating a monthly average over the last two years.
Stay on the present job – the lender will typically give a credit for overtime income.
Lenders will rarely consider future bonuses as income unless you have been on the same job for two years and have a history of receiving those bonuses.
They then will average your income from bonuses over the previous two years while calculating your income.
Bonus income cannot be averaged nor calculated as no history will exist with a new employer.