Today, I answer three different employment questions for people who want to buy a house.
Contact Tom Arnold, RE/MAX GOLD
(707) 365-1189 For financing, contact me directly, (206) 919-4542 or cwarren@envoymortgage.com.
Question #1
My employer has offered me a promotion and pay raise. It is in a different department. Can I make this change now while I am in the process of looking for a house, or do I need to wait until after closing?
Answer
Take the promotion and pay raise. It will not hurt your ability to qualify for a home loan. For your job title, tie the two positions together. Here’s a real life example of someone who went from being a mechanic to a service advisor.
Employer: Honda Title: Auto Service (Title encompasses both positions. We then included a letter of explanation which told the underwriter that the home buyer had worked for Honda for 10 years, nine as an auto mechanic and one as an auto service advisor with an increase in pay.)
Question #2
I am in the middle of buying a house with closing in three weeks, and I was just laid off work yesterday. However, I know I can find another job within a week. My loan is already approved. Do I need to tell my loan officer? Will this ruin my chances of buying the house?
Answer
You must tell your loan officer. There is no way to keep your job switch a secret, even if your closing was in three days, because all lenders pick up the phone and call the employer right before funding for this exact reason. They don’t want to wire out money if the borrower lost their income yesterday.
However, if you get employed again right away, you will still get your loan. You will need to provide a letter of explanation for the job switch, an offer letter or employment contract, plus a paystub to show you actually took the new job and what your pay is. Depending on the time it takes to get paid, you might need to ask for an extension on the closing date, but you can still get your house.
Question #3
I have been working for a financial investment firm for eight years and I make a good six-figure income. When I applied for a home loan, the bank turned me down because I started my own business three months ago. I think that is totally bogus, because I am retaining my investment clients. Should I go to a mortgage broker instead?
Answer
It won’t matter if you apply with a bank, broker, direct lender, or a credit union. You will not be able to get a mortgage until you have been self-employed for 24 months.
Rebuttal
But that makes no sense! I am doing the exact same thing as I’ve been doing for eight freakin’ years!
Answer
It doesn’t matter if you’ve been doing the exact same thing for thirty years. If you switch from being a W2 employee to being self-employed, you must show an income as a self-employed person for a full two years before Fannie Mae or Freddie Mac will approve your loan. That said, if you can find a seller who is willing to carry the contract (essentially act like a bank), then you’re in luck.
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