Don’t Move Money Around
When a lender looks over your loan package, one of the things they look for is where the money for your down payment and closing costs will be coming from. You will be asked to provide statements for the last two or three months on any cash accounts. This would be checking accounts, savings accounts, money market funds, CD's, stocks, mutual funds, retirement accounts, and your company 401K.
If you regularly move money between accounts, because there may be large deposits and withdrawals in them, the mortgage underwriter -who actually approves your loan - will most likely require a paper trail of all the withdrawals and deposits. This means you may be required to produce canceled checks, deposit receipts, etc.
You may get frustrated with your lender, but this is what is required of them by the investors that back the loan. It's best just to leave your money as is until the process is complete or you are advised by your loan officer.
For most the most part, changing jobs will not affect your ability to qualify for a loan, especially if it is for a pay increase.
How Changing Jobs Affects Buying a Home
If you are on a salary and don't earn additional income from things like commissions, bonuses and over-time, changing jobs should not create a problem, as long as you are staying in the same line of work.
If your income is based on hourly wages and you work forty hours a week with no over-time, there should not be any problems either.
If a larger part of your income comes from commissions, it is in your best interests not change jobs before you buy a home. Since, lenders take the average of the commissions you've earned over the last two years.
Changing from one commission job to another creates doubt about what you will earn in the future from your new employer, since there is no track record to go by. This is true even if you are in the same industry, the underwriter cannot prove that future earnings will be the same as past earnings.
If a larger part of your income from your new job will come from bonuses, you should also consider waiting to make an employment change. Lenders will rarely consider and promised future bonuses as income unless you have been on the same job for two years and have consistency in receiving bonuses. Then they will likely take the average your bonuses when calculating your income.
If you earn an hourly income but typically work less than forty hours a week, it is also best that you not change jobs. Without a good way to tell how many hours you will work each week on your new job, there is no way to correctly calculate your income. If you stay on your current job, the lender has a standard to average what you have made over the years.
Each employer awards overtime hours differently, so if you change jobs your overtime income wont be easily figured if you change jobs. If you stay on your current job, your lender can better calculate your overtime hours allowing them the ability to give your credit for that income. Like all other income, they will calculated this based on the past two years to get an average monthly amount.
Self-Employment If you are considering a change to self-employment before buying a new home, it is definitely in your best interest not to do it. You need to purchase the home first.
Just as will all other income sources lenders like to see a two-year history of self-employment income before approving a loan. The catch to self-employed individuals is that they tend to have a lot of expenses on the Schedule C of their tax returns, especially when starting out. This does reduce your tax obligation, but it also reduces your income to qualify for the home loan because the lender uses your adjusted gross income to qualify you.
If you are already self employed and considering changing the structure your business you should also wait until you purchase your new home.
Do Not Make a Major Purchase
The most common mistake made is purchasing a car, but this also includes furniture, appliances, electronic equipment, jewelry, vacations, basically anything you charge on a credit card or need credit approval to get