RE/MAX experts share tips for homebuyers who are also switching jobs.
In the past few years, it seems as though many Americans are switching jobs on the regular. According to the U.S. Bureau of Labor Statistics, the number of “quits” (defined as voluntary separations initiated by the employee), was 4 million in February 2023. Not considering layoffs and discharges, as well as hires and job openings, various levels of activity in both labor demand and turnover may have residual impacts on the housing market and home purchase behavior.
As RE/MAX President and CEO Nick Bailey recently shared on a segment with the New York Stock Exchange “Floor Talk” show, real estate is all about timing, but not in terms of what’s happening in the market. It’s about the timing of what’s happening in the lives of the parties involved. People often choose to buy or sell a home based on a life change – marriage, divorce, birth, death, etc. Or even a change in employment.
So, what does it mean if you’re in the process of buying a home and you find yourself simultaneously transitioning jobs? First and foremost, don’t panic. RE/MAX real estate experts have some tips and considerations to help guide you through:
1. Consult with your real estate agent and lender
Tim Yee, Broker Associate with RE/MAX Gold Bay Area in Redwood City, California, advises to take a breath and consider the situation from all sides.
“If you are currently in a real estate transaction and you or your partner get laid off or experience a job transition, sit back, and take a deep breath and consult with your real estate agent and mortgage lender to determine what options you have,” he says. “Carefully review your contract, contingencies and timeframes to analyze your risks if you move forward or decide to cancel. This is most likely the most important financial transaction you will ever make, and it is imperative to carefully weigh out all the potential scenarios.
“It is always best to be armed with the latest information and quality advice from experienced real estate professionals to avoid pitfalls and protect your best interests throughout the transaction,” Yee says.
Changing jobs may interfere with the process of being approved for a loan. Experts suggest notifying your lender of the change in your employment status as soon as possible. When you experience a job change after applying for a mortgage, the lender has to re-start their underwriting and base everything off your new job.
If you are switching careers or moving from a salaried position to a contractor or a position based on commissions, you may need to adjust your loan application. It’s important to work with your real estate agent, especially if you are already under contract to buy a home so they can be prepared for a change in closing date which could occur if the mortgage lender needs to re-verify your financial information.
2. If possible, close on your home before going through a job change
One option to consider is to close on the purchase of a home before making a job change. Your lender will verify your employment in the middle of your loan application process, and they will verify it again prior to closing. After closing on your home, you could make plans to change jobs as long as you are confident that you can still afford the regular monthly mortgage payments.
3. It may be beneficial to finalize your job situation BEFORE applying for a mortgage
The mortgage loan application process can be lengthy, so completing any job changes before you begin may save you time down the road (an important factor to keep in mind in a competitive buying market!).
Your loan application should likely go smoothly if you get a new job in the same industry or position with similar or more pay. If you have not closed on a home yet and your employment situation materially changes after applying for a mortgage, that may impact your loan approval.
Nick Painz with RE/MAX Alliance in Westminster, Colorado shares that most often, salaried positions make it easier when handling a job transition during a sale.
“With a salary job, we generally just need an offer letter with a hard start date that is no later than 60 days after closing. For hourly, we typically need the same thing, with a written guarantee from the employer that you will be full time with 40+ hours,” he explains.
4. Consider alternative financing scenarios
If a change in employment is hampering your loan application, you can consider other financing scenarios. For example, if you are purchasing a home with a spouse, can that person qualify by themselves? Could splitting the bill with friends or family make homeownership more achievable?
A trusted real estate professional can help connect you to the right resources to best explore your options. John Manning, Managing Broker of RE/MAX Gateway in Seattle, Washington would encourage the buyer to explore how financing with the help of others could cover a shortfall through a drop of income.
5. Maintain your credit score
Manning also advises to mind your credit and where possible, avoid non-wealth-building expenses such as high car payments. Credit usage that negatively impacts credit score may interfere with your chances of being approved for a mortgage altogether, he cautions.
“Fear of job loss can be a powerful deterrent to purchasing a home even though renting might be just as much as a monthly mortgage payment,” Manning adds. “In uncertain times, it can feel safer to keep all options open including the mobility to move to a different city for employment. In reality, breaking a lease isn’t without its difficulties and homeowners have options to maintain their investment such as renting out their home or even taking on a roommate to pay the mortgage in a period of unemployment.”
Ultimately, changing jobs can impact the process of buying a home – but when staying on top of communication and working with trusted professionals along the way, the change can have minimal disruption in the timeline of the transaction.
Article originally appeared on RE/MAX.com.
