Career, Finances, and Your FHA Mortgage Application
November 27, 2023
Borrowers, especially first-time homebuyers, are typically encouraged to start planning and saving for an FHA loan at least 12 months ahead of time.
But within that window of time, there are some things to know. There are some things to do and some to avoid in the year leading up to your home loan application.
Don’t Make Big Career Changes a Year Out from Your Loan Application
Rest assured, we are NOT talking about pay raises, promotions, or other upwardly mobile moves within the company you currently work for.
What ARE we talking about? Going freelance, switching from full-time to contract work, or going indie and starting your own business.
Such major career changes may make your lender reconsider your loan application until you have had enough time in the new job to prove your new income is likely to continue. Your lender typically needs at least 24 months as a self-employed person, freelancer, or new contact employee.
Depending on the circumstances, anything less than 24 months may not work for your lender.
Don’t Add New Credit
The goal within the 12-month planning window you’re using for your home loan should be to lower your debt, not add to it.
The debt you carry ahead of your home loan application is an important factor. Your lender will pay close attention to your debt-to-income ratio. Get it as low as you can before you apply.
Don’t Apply Right Away if You’re New to the Job Market
If you just graduated from college and are just starting to experience the full-time job market, you may need to wait a year to 24 months before you apply for a loan.
All the reasons listed above are considerations in this scenario, too. Time on the job, the need to show income likely to continue, and that your current job is stable are all big factors.
There are some exceptions for highly skilled work. If you are a doctor or pilot in this situation, there may be different requirements. Ask the lender about this issue if you have questions. Don’t forget that before you start saving or making plans, you always have the option to call a participating FHA lender to ask questions.
You can ask how long that particular lender requires you to be on the job and earning before you can realistically qualify for an FHA loan or refinance loan. You can also ask what the lender’s typical advice is for buyers in your circumstances.
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Disclosures Give Transparency to Borrowers
Understanding the Purpose of Your Mortgage Down Payment
Putting Money Into Your Escrow Account
But within that window of time, there are some things to know. There are some things to do and some to avoid in the year leading up to your home loan application.
Don’t Make Big Career Changes a Year Out from Your Loan Application
Rest assured, we are NOT talking about pay raises, promotions, or other upwardly mobile moves within the company you currently work for.
What ARE we talking about? Going freelance, switching from full-time to contract work, or going indie and starting your own business.
Such major career changes may make your lender reconsider your loan application until you have had enough time in the new job to prove your new income is likely to continue. Your lender typically needs at least 24 months as a self-employed person, freelancer, or new contact employee.
Depending on the circumstances, anything less than 24 months may not work for your lender.
Don’t Add New Credit
The goal within the 12-month planning window you’re using for your home loan should be to lower your debt, not add to it.
The debt you carry ahead of your home loan application is an important factor. Your lender will pay close attention to your debt-to-income ratio. Get it as low as you can before you apply.
Don’t Apply Right Away if You’re New to the Job Market
If you just graduated from college and are just starting to experience the full-time job market, you may need to wait a year to 24 months before you apply for a loan.
All the reasons listed above are considerations in this scenario, too. Time on the job, the need to show income likely to continue, and that your current job is stable are all big factors.
There are some exceptions for highly skilled work. If you are a doctor or pilot in this situation, there may be different requirements. Ask the lender about this issue if you have questions. Don’t forget that before you start saving or making plans, you always have the option to call a participating FHA lender to ask questions.
You can ask how long that particular lender requires you to be on the job and earning before you can realistically qualify for an FHA loan or refinance loan. You can also ask what the lender’s typical advice is for buyers in your circumstances.
------------------------------
RELATED VIDEOS:
Disclosures Give Transparency to Borrowers
Understanding the Purpose of Your Mortgage Down Payment
Putting Money Into Your Escrow Account
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