Over the last few years, there has been a noticeable increase in job hopping among Americans. The U.S. Bureau of Labor Statistics reports that in February 2023, 4 million employees voluntarily left their jobs, also known as "quits." While this doesn't include layoffs and terminations, it's important to consider how these fluctuations in labor demand and turnover could impact the housing market and affect home buying behavior.
According to Nick Bailey, the CEO of RE/MAX, timing is crucial in real estate. However, it's not about the state of the market but rather the events happening in people's lives. Decisions to buy or sell often stem from major life changes such as marriage, divorce, or career shifts. This begs the question - what should you do if you're job hunting while simultaneously buying a home? Don't fret! We've got tips to help you navigate this tricky situation.
1. Consult with your real estate agent and lender
If you're going through a real estate transaction and experience a layoff or job transition, take a deep breath, and consult your real estate agent and mortgage lender for your next steps. Analyze your contract and contingencies to understand the risks. This is a crucial financial decision, and it's essential to evaluate all possible scenarios.
Changing jobs might impact loan approval, so notify your lender as soon as possible. If you change jobs after applying, the lender will have to restart their underwriting based on your new job information.
If you're switching careers or moving from a salaried job to a commission-based one, you may need to adjust your loan application. Collaborate with your real estate agent, particularly if you're already in the process of buying a home, to be ready for potential changes to the closing date if your financial information needs re-verification.
2. If possible, close on your home before going through a job change
Closing on a home before changing jobs is a smart approach to consider. Your lender will confirm your employment twice during the loan application process. Once you've closed on the house, you can confidently explore new job opportunities without worrying about your loan approval. Just make sure you can still make your monthly mortgage payments.
3. It may be beneficial to finalize your job situation before applying for a mortgage
Applying for a mortgage can be time-consuming, but completing any job changes beforehand can help you save time in a competitive buying market. It's important to know that if your employment situation changes after applying for a mortgage, it could impact your loan approval. However, if you get a new job in the same industry or position with similar or higher pay before closing on a home, the loan application should go smoothly. In most cases, salaried positions simplify job transitions during sales. For hourly jobs, you typically need an offer letter with a specified start date and a written guarantee from the employer that you will be working full-time with 40+ hours.
4. Consider alternative financing scenarios
Before you begin the mortgage loan application process, completing any job changes can help save you time later. This is especially important in a highly competitive buying market. If a change in employment is causing issues with your loan application, there are other financing scenarios to consider. If you are buying a home with a spouse, they may be able to qualify for the loan on their own. Additionally, splitting the bill with friends or family could make it easier to achieve homeownership.
5. Maintain your credit score
Take control of your credit and avoid unnecessary expenses like high car payments to avoid negatively impacting your credit score. This could hurt your chances of getting approved for a mortgage in the future.
Although it may seem tempting to keep all options open during uncertain times, breaking a lease can be difficult. Homeowners have options to protect their investment, like renting out their home or taking on a roommate during periods of unemployment.
Changing jobs can have an impact on the home-buying process, but communication and working with trusted professionals can minimize any disruption to the transaction's timeline. Don't let a job change hinder your dream of owning a home.
