Tips for Getting a Mortgage When You Have a New Job
07.29.2021 | Category: Homebuying
You just landed a new job and now you’re looking for a new place to land your feet. Perhaps you’re now working from home and are looking for your own office space. Or maybe you just relocated for the position and are new to the area.
Whatever the reason for your house hunt, as a new employee you may find yourself asking, “Can I get a mortgage with a new job?” The answer is, “Yes!”
While qualifications vary from lender to lender, a new job shouldn’t deter you from your house hunt. A variety of facts are taken into account when approving homebuyers for mortgage loans, including creditworthiness, down payment and debt-to-income ratio.
To get you started, we’ll go over the most important factors to help you get approved and into your new home with ease.
Consider Your Creditworthiness
One of the most important aspects that goes into deciding whether or not you’ll be approved for your mortgage loan is your creditworthiness. This is usually determined by calculating your credit score with one of the three major credit bureaus. Before you apply, you can check your credit report for free with annualcreditreport.com, the federally authorized site that allows you to view what lenders see in your credit report.
Most lenders want to see that you have a good habit of keeping your credit balances low, paying on time and having a healthy mix of credit usage. If you see any surprises when checking your credit report, such as unfamiliar accounts, late payments or high balances, you can address these items before you apply. These are the most important behaviors that go into calculating your credit score and determine whether you will be approved or at what rate. These factors will also have a much greater impact on your ability to be approved than your new job.
Save for Your Down Payment
Generally, you want to be able to put down at least 20% of your purchase price as a down payment for your mortgage loan. Oftentimes, the goal of saving for 20% can seem especially daunting, especially if you just started a new job and only recently started saving.
If you're a first-time homebuyer or a current or former member of the military, you may meet specific criteria for your mortgage loan that allows you to put down less than 20%. For example, FHA loans are federally backed loans that allow first-time homebuyers to have less than 20% saved as a down payment. Additionally, VA Loans are mortgages from approved lenders – like Mutual of Omaha Mortgage – with a federal guarantee that allows for some flexibility in key mortgage requirements.
Analyze Your Debt-to-Income Ratio
The amount of debt you have compared to your income will be a key consideration when trying to getting a mortgage with a new job. Some experts believe the ideal debt-to-income ratio for homeowners is about 36% but you may be approved if your debt-to-income ratio is higher with excellent credit and a healthy downpayment.
Of course the lower your debt-to-income ratio, the better. Borrowers with low debt-to-income ratios are able to show that you’re able to balance debt well. This will give you a good chance of qualifying for low mortgage rates, whether you're trying to be approved for a mortgage loan with a new job or not. If you feel your debt-to-income ratio might be too high and your new job allows you to pay down high balances, use your higher income to lower your debt-to-income ratio.
While these factors are some of the most important for securing approval on your mortgage loan, you may be asked for additional financial information before your loan is approved, especially if you recently changed jobs. That shouldn’t deter you from your house hunt. Getting approved for a new mortgage loan is not only possible, but relatively common with a new job. To help you feel prepared, you should have the following information handy should you need to provide additional financial information.
Bank statements help lenders see that you’re able to save and have enough to cover your expenses should an emergency arise. Lenders typically like to see that you have at least three months of mortgage payments saved in the bank that won’t be used for other homebuying transactions such as your down payment, closing costs or mortgage insurance premiums.
Tax Return Records
Tax returns from the previous year or two give an idea of how much income you previously earned and provide any additional sources of income you might have to help you qualify for your mortgage loan. This may include the last two years of W-2s as well as any 1099-misc forms. If you’re self-employed or have a part-time side job, this might help boost your ability to qualify, especially if this helps your debt-to-income ratio appear lower.
Past Pay Stubs
In addition to W-2 forms which will show your past income, you will also be asked for your past pay stubs from your new employer. If you regularly earn overtime, sales commission or performance bonuses, you can usually add that to your base salary when determining your debt-to-income ratio and how large of a mortgage loan you can qualify for. They also provide lenders with proof of current employment.
Learning how these factors determine your mortgage approval as a new employee is an important step and Mutual of Omaha Mortgage is here to help ensure you get the best rate for your home mortgage loan. Interested in learning more about your mortgage loan options? Click here to visit Mutual of Omaha Mortgage's full list of purchase loan offerings and get started today!