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  Changing Jobs.

How Changing Jobs Affects Buying a Home

For most people, changing employers will not really affect your ability
to qualify for a mortgage loan. For some homebuyers, however, the
effects of changing jobs can be disastrous to your loan application.

Salaried Employees

If you are a salaried employee who does not earn additional income
from commissions, bonuses, or over-time, switching employers should
not create a problem. Just make sure to remain in the same line of
work. Hopefully, you will be earning a higher salary, which will help
you better qualify for a mortgage.

Hourly Employees

If your income is based on hourly wages and you work a straight forty
hours a week without over-time, changing jobs should not create any

Commissioned Employees

If a substantial portion of your income is derived from commissions,
you should not change jobs before buying a home. This has to do with
how mortgage lenders calculate your income. They average your
commissions over the last two years.

Changing employers creates an uncertainty about your future earnings
from commissions. There is no track record from which to produce an
average. Even if you are selling the same type of product with
essentially the same commission structure, the underwriter cannot be
certain that past earnings will accurately reflect future earnings.

Changing jobs would negatively impact your ability to buy a home.


If a substantial portion of your income on the new job will come from
bonuses, you may want to consider delaying an employment change.
Mortgage lenders will rarely consider future bonuses as income unless
you have been on the same job for two years and have a track record
of receiving those bonuses. Then they will average your bonuses over
the last two years in calculating your income.

Changing employers means that you do not have the two-year track
record necessary to count bonuses as income.

Part-Time Employees

If you earn an hourly income but rarely work forty hours a week, you
should not change jobs. There would be no way to tell how many hours
you will work each week on the new job, so no way to accurately
calculate your income. If you remain on the old job, the lender can just
average your earnings.


Since all employers award overtime hours differently, your overtime
income cannot be determined if you change jobs. If you stay on your
present job, your lender will give you credit for overtime income. They
will determine your overtime earnings over the last two years, then
calculate a monthly average.


If you are considering a change to self-employment before buying a
new home, donít do it. Buy the home first.

Lenders like to see a two-year track record of self-employment income
when approving a loan. Plus, self-employed individuals tend to include
a lot of expenses on the Schedule C of their tax returns, especially in
the early years of self-employment. While this minimizes your tax
obligation to the IRS, it also minimizes your income to qualify for a
home loan.

If you are considering changing your business from a sole
proprietorship to a partnership or corporation, you should also delay
that until you purchase your new home.

copyright 2000 by Terry Light and RealEstate ABC


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