New job opportunities can be exciting! They typically offer a higher income, and more potential for growth. But what happens if you’ve purchased a new home and are offered a new job prior to closing on your new home?
This is not an uncommon situation.
Should you find yourself in this position, you’ll need to fight the urge to immediately sign on the dotted line and accept the new offer. Your mortgage was approved based on your previous job, not based on your new one. Even if you’ll be making a lot more money with the new job, you want to be careful here. The lender has the right to decline your application since the terms of your original approval have now changed.
The first thing you’ll want to do is let your broker know the details of your new opportunity. In many cases, you still may be able to proceed with the new job offer, however you’ll want to ensure you get this sorted out prior to accepting it.
Do not make any assumptions!
Let’s take a look at what the lender will be looking for from your new job offer:
Will you be on probation on your new job? This can be a deal breaker for some lenders, regardless of how good the new opportunity may be. Most lenders will however be okay with probationary employment, providing you have a solid history of working in the same industry.
If you are moving into a new field of work, then this could be a major problem.
Probation means that your employment is not guaranteed as an employer has not ‘officially’ hired you full time until you have completed the probation period. They can let you go at any time during this period, for any reason. If you are venturing into a new industry, you have no track record of performing in this industry, then this gives the lender even more uncertainty that your employment will continue.
How your income will be determined is another major point of consideration. If it’s a guaranteed base salary that is equal to, or higher than your previous salary, then there shouldn’t be any issues regarding the income itself. However, if there is a non-guaranteed component to the income, such as commission or bonus, then this could be an issue. Also, if the new employment is paid on an hourly basis without a set minimum number of guaranteed hours per week, then this could also present an issue.
For example, let’s say your original job paid you $75,000, and the expected earnings from your new job is $120,000, however only $50,000 is from a base salary. The remainder is a performance bonus or commission. In this case, the most a lender will consider for your income is $50,000. Even if the additional earnings are ‘pretty much’ guaranteed, there is still no set number that can be used to base your approval on. For non-guaranteed earnings such as this, a lender will want to see a two-year history of working for the same company, which then allows them to average out the earnings to come up with a usable income for you.
Before accepting a new job offer, always reach out to your mortgage specialist to let them know your situation. The worst thing you can do is make an assumption. This can lead to unnecessary stress, and possibly even a declined mortgage, which could happen right before your closing date. Communication with your mortgage specialist is key.
Paul Meredith is the author of the Amazon #1 best selling book, Beat the Bank – How to Win The Mortgage Game in Canada, and has ranked as one of the top 75 mortgage brokers in Canada since 2016. He was a finalist for Mortgage Broker of the Year in 2018, and can be seen as the exclusive mortgage broker on season two of TV’s Top Million Dollar Agent.