The Way Employment Status Affects a Home Loan

If you’re thinking about switching careers or changing employers before you apply for a home loan or refinancing, perhaps you should consider how it can affect your financing opportunities? While the affects of making a career move may not impinge on your ability to qualify for a new mortgage loan, for some homebuyers, a new job may wreak havoc with the passage of their loan application.

Salaried Employees For the salaried employee, home loan financing may not be affected by their career change. Generally, a salaried professional does not earn additional income from bonuses, overtime, commissions. Consequently, making an employment change should not pose a great obstacle. At the same token, a career change can represent a higher salary, meaning an improved qualification for a mortgage loan.

Hourly Employees For employees compensated based on hourly wages and who maintain a normal forty-hour workweek without over-time, making a career change or employer switch should not impose any financing difficulties.

Self-Employment As self-employment features a variety of benefits, obtaining financing can be a little tricky. For the gainfully employed, home loan seeker considering sole proprietorship, the career change is not recommended. Obtain mortgage financing before making he switch. On the other side of the spectrum, for the business the plans to upgrade their sole proprietorship status to a partnership or corporation, the process should be postponed until the new home financing has been finalized.

In generally, lenders prefer to review a two-year track record of self-employment income prior to making a loan approval. Moreover, self-employed mortgage consumers have a propensity of including an exorbitant amount of expenses on their tax returns (Schedule C). As a Schedule C can reduce the amount of tax obligations to the IRS, it can also decrease the necessary income needed to qualify for a home loan.