There are many moving parts to your mortgage loan application. Today, I’ll answer a few common questions when it comes to your employment status.
How will your employment status affect the mortgage loan application?
Your employment status can affect your loan application in a couple of different ways. We are looking to see if you have part-time or full-time employment, as part-time has different guidelines. We will also look to see if it’s seasonal employment. You need to prove that you have a regular, steady, stable income that will continue.
We do see some families that work in union states. They may have a full-time job but only work 10 months out of the year with two months off in the winter. They spend those two months on unemployment income because that is how their union works. That income would be acceptable as long as we have a two-year history of such employment.
Again, we are really looking to see if you have income that is steady, stable, and increasing. We are also looking at the likelihood of its continuance.
Is employment verified or claimed on the day of closing or in advance?
Employment has to be verified at least 10 days prior to closing. It’s usually done when we send the file back for our clear to close as soon as the underwriter reviews the loan. If we don’t have that verbal verification of employment in the file, they can’t push that to the closing department.
In a perfect world, that’s done a few days before closing. In a 30-day contract, an average of 21 people touch the loan file from beginning to end, so sometimes the verbal verification of employment is not done until the day before closing or the day of closing. As a client, you need to stay at your job and stay in good standing all throughout the loan process.
What if I get promoted or find a higher paying job?
If you get promoted within the same company, take the promotion and keep going. We can verify the new terms of employment with HR. As long as we are able to show that the income is steady, stable, and increasing, then we are good to move forward.
If you find a higher paying job, there are a couple of different things to consider.
Employment contracts often have contingencies, such as drug screenings or background checks. You usually don’t get an offer letter and then start the next day. Most of the time, the hiring process takes at least a couple of weeks.
Once those contingencies are met, we do require 30 days of pay stubs in order to close. If it takes two weeks to start the job and then you need 30 days of pay stubs, that can delay closing. If the pay period is biweekly, you might not get your first paycheck for a month, which could delay things further. Starting a job at a new company could potentially delay your closing for 45 to 60 days.
Different loan programs, such as FHAs, will have their own guidelines. Unfortunately, one of my clients and I are dealing with this right now.
My client is a cancer survivor. Two years ago, she had a gap of employment for six months while she got her chemo and radiation treatment. Since then, she has been employed for 19 months. She spent 13 months at one job and switched employment to another job. FHA requires that if you have a gap in employment over the last two years, then you have to be at your current job for six months.
We have to adhere to those guidelines, so her closing has been delayed. I’m happy to say that she will be closing in a couple of weeks now, so we did make it through.
Can I leave my job after the closing?
As lenders, we always want to make sure that your loan can perform. We never want to put you into a home that you may not be able to afford.
Now, we won’t verify employmfent after closing. Once we close, it’s your life. No one can predict the future. You can change jobs or quit, but I advise that you proceed with caution. Make sure that you are making the right decision. After all, when you buy a home, you are making a 15-, 20-, or 30-year investment, so make sure that you set yourself up for success.
As you can see, your employment status plays a major role in the mortgage loan application process. If you have any questions, please don’t hesitate to give me a call or send me an email. I would be happy to help you!