Knowing how long you need a job to get a mortgage is important. Many people think that you need a job for two years before a lender will talk to you. While it is desired that you have a job for at least two years, it’s not always required.
What lenders want to see is that you have dependable and reliable income. They want to know that your income will continue for the foreseeable future and that you receive it regularly. A two-year history at the same job provides that level of reassurance that lenders need, but it’s not the only way to get a loan.
Dealing With a New Job
If you have a new job, you may have to jump through a few more hoops. Each lender will have a different amount of time that they want you to be employed at that job before they’ll give you a loan. Some will allow it after just 30 days, while others may require as long as 6 months to a year. If you come across one lender that wants you to wait until you are employed longer, you can always apply for the loan with another lender.
The best thing you can do if you have a new job and need a mortgage, is to make sure the rest of your qualifying factors are ‘good.’ In fact, they should be better than good. Lenders want to know that you aren’t a high risk of default overall. What they want to see is:
- High credit scores
- Low debt ratios
- Reserves on hand
- No recent collections or judgments
- No bankruptcies or foreclosures in your recent past
If you have a high credit score, low debt ratio, a lot of money in savings, and no negative credit events, you may be able to get by with a new job.
Proving a Successful History
If you changed jobs but stayed within the same industry, it can work to your advantage when getting a loan. Lenders want to know that you have what it takes to be successful at the job. Let’s say that you left your job that you were at for three years because you find a better opportunity. The job position is higher than the one you had and the pay is higher. These are both compensating factors.
While the job may be new, lenders may look upon it in a favorable manner because of your history in the industry. Now if you left one job to take another job in an entirely different industry, that’s a different story. Let’s say you left a job as a teacher to become a financial analyst. The two jobs aren’t related. Lenders will look at your new job as a risk. They may want to wait until you are at the job for six months to a year before you can use it to qualify for a loan.
The exception to this rule is if you received some type of training or went back to school to take on the new job. Career changes aren’t a bad thing and lenders recognize that. Again, they just want to make sure that you are a good risk. They want to know that you will succeed at the job and it’s not just a job you’ll hold for a short while and then quit.
Work on Those Compensating Factors
As we discussed above, you’ll need compensating factors if you have a new job. Lenders look at the big picture – not just the fact that you are at a new job.
Your credit score is probably the one factor you should focus on the most. That’s the first thing lenders see when looking at your application. They want to know that you pay your bills on time and don’t overextend yourself financially. They want to see that you can handle your finances well and your credit score lets them know how well you do that.
Lenders will also focus on your debt ratio. They want you to have little debt outstanding compared to your gross monthly income. This doesn’t mean that you can’t have a car payment or some credit card debt. It does mean, however, that you can’t have a large amount of credit card debt or be buried in installment loans.
Putting all of the pieces of the puzzle together, how does your risk of default look? If you have a new job, are other areas of your application low risk or are you a high risk of default? This is what lenders look at when deciding if your new job is acceptable for your new loan.