The job market is rebounding across Canada, even amid the pandemic. More job opportunities and quality positions are becoming available, giving ambitious workers a reason to consider changing jobs. This is great news for anyone not currently looking to get a mortgage.
But if you’re looking to buy your first home, don’t jump on those opportunities yet. Actively seeking alternative employment or accepting a new job offer can do you more harm than good when it comes to finalizing your mortgage deal. Mortgage lenders always look at the applicant’s current financial position. Change that, and you could be looking at losing your approval altogether.
Read on to learn the impact of changing jobs prior to closing the deal, the risks mortgage lenders use when determining eligibility after a job change, and what you should do about relocating when you have a pre-approved mortgage.
Changing Jobs Prior To Closing The Deal
If your mortgage isn’t finalized, changing jobs can be a major red flag for lenders. Think about your work history—what does it look like? Have you stayed with the same company for years? Or are you more of a job-hopper?
Many mortgage lenders would consider a change of employment within the same industry a stable and reliable low risk, as long as the change is for professional development reasons. Unlike job-hopping—frequently changing jobs yet remaining in the same position, or worse, frequently changing industries—would be seen as instability in your employment history, making you less reliable and a higher risk. Frequent and/or lengthy periods of unemployment will also raise your risk factor.
Mortgage lenders require at least two years of job history. If you change jobs, you’ll need to prove how your income will remain stable and reliable. Be prepared with a few things they may ask for:
- A pay stub showing an equal or greater salary
- A letter of recommendation from your employer which can give them a sense of your job security
- Stats and figures showing that your industry is strong and healthy
Providing this information doesn’t guarantee you’ll get the same approval conditions or that you’ll even be approved for a mortgage at all, so changing jobs is still not recommended. But If you must do so before approval, these are ways of boosting your odds.
Risks Of Changing Jobs Prior To Approval
If you change jobs during the home buying process, expect your lender to reassess several qualifications. They may require for the following details:
- A detailed explanation of why you changed jobs. Your reasons will determine how serious you are about buying a home
- Is your new job salaried and does it pay equal or better? If your new job is based on bonuses, commissions, and the promise of overtime—even if there’s an opportunity to double your current income—the lender won’t consider this a guaranteed form of income without 2 years of history.
- Is your new job in the same industry? If you change industries, your reliable and stable employment history is no longer relevant as they have new risks to consider. Will you be successful in the new field? What are your qualifications for the new position? Is the industry healthy? How successful will the new company be? Lenders want to see at least 2 years of history in the same field to show competence and commitment
- Do you have an extended probation period? Mortgage lenders won’t consider your job “permanent” until the probationary term is over. Because the employer can end your employment during this term, you’ll be considered high risk
- Did you switch to self employment, freelance or contract work? Again, the lender will need 2 years of this work history plus 2 years of tax returns—this makes it 3 years before a mortgage will even be considered. Not the best decision if you want a mortgage sooner
Relocating With a Pre-Approved Mortgage
Leaving your job for relocating purposes before closing the deal will likely lead to a reassessment of circumstances. You’ll need to provide your lender with a pay stub and a letter of recommendation from your employer. If your new job is with an established company in the same industry as your previous job and the salary is comparable or better, you have a better chance of keeping your pre-approval.
You should always try to purchase and close the sale before giving your two weeks notice. And don’t let your excitement cloud your judgment—your lender will verify your employment when you first apply for the mortgage and then reconfirm prior to closing. Patience is key to maintaining your approval.
Still Unsure About That Job Offer?
No matter how you look at it, changing jobs while trying to buy a house will only hinder the process. It’s always best to hold off—if you can—until you secure your mortgage and close the deal. You’ll not only save yourself the stress and hassle of getting re-approved, but you’ll avoid the possible disappointment of losing your approval and having to start over again in a couple years.
Are you looking to speak with a trusted local realtor who can help you navigate the transition between changing jobs and getting your mortgage signed, sealed, and delivered? If so, let’s talk!
Joel Cooper, a prominent realtor serving Toronto and the GTA for 13+ years, has shared many invaluable resources with clients, leading them to make strong and calculated decisions throughout their home buying process.
Reach out today to get started.
Hi, I’m Joel, a real estate professional based in Toronto.
My approach is simple—I put you first. I believe in open communication, total transparency, and meaningful results. I’ll guide you through the real estate process, market values, and always keep the focus on you—and your needs.