Change Jobs, Lose Bonus Income & LOSE HOUSE!
It is usually 100% OK to change jobs at any time IF … borrowers are NOT dependent upon bonus, overtime or commission income to qualify.
If, however, borrowers are dependent upon bonus, overtime or commission income to qualify for a loan (very common in today’s world), changing jobs can be a deal killer!
This is the case even if the new job offers tremendous bonus income potential.
WE NEED “A HISTORY” OF BONUS, OVERTIME AND COMMISSION INCOME
Lenders require “a history” of bonus, overtime and/or commissions income from a borrower’s current employer before they can use the income to help a borrower qualify for a loan.
I once blogged about a borrower who was on track to make almost $200,000 of income in the year we qualified him – and he thought he was a “slam dunk” because he had never made less than $175,000 over the previous five years.
But – he had just started a new job, with a base salary of only $85,000 and no bonus or commission history with the new employer.
So, we could only use his $85,000 base salary for qualification purposes, and that prevented him from buying a home altogether in his market.
More recently, we have had a slew of borrowers switch jobs mid-transaction or just prior to getting into contract, and all of them were dependent upon extra (non-base) income to qualify.
This is much more common nowadays too because millennials tend to switch jobs far more often than any of the previous generations.
And again – job switches are usually not an issue … as long as lenders don’t need bonus income to qualify.
FINAL NOTE: The above blog refers to W2/salaried jobs only. It does not refer to switching from a W2 job to self-employment, which almost always requires two years of history irrespective of bonuses, overtime or commissions.
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167