Getting a Mortgage with a New Job
When you start a new job, it can be a very exciting time, embarking on a new career and meeting new work colleagues. Whether you are changing career completely, or switched to a similar job with a new company, there are plenty of reasons to look forward to the future.
However, if you are in the process of applying for a mortgage, or are thinking about doing so in the next few months then starting a new job could impact your application. This information should help you to understand how your mortgage application could be affected by starting a new job and how to work around potential problems so that you can go ahead with purchasing a property.
Providing proof of income through payslips
For many lenders, part of the lending criteria is that the applicant will provide payslips for the last three or more months to prove their income. If you have not been in work for a few months and are unable to provide three recent payslips, then this could cause a problem when you are applying for your mortgage. You could wait until you have been in the job for six months, so that you can provide the proof of income through payslips, although some lenders will accept a letter from your employer that confirms your salary instead.
Some people choose to delay their mortgage application if they are due to switch jobs or try to get a mortgage agreed before they start the job application process. However, if it is necessary to change jobs and buy a home at the same time, there are still solutions for this.
Getting a mortgage when you have just started working
If you have just recently started your new job, then you will not have the payslips to prove your new income. Many mortgage providers will only lend to an applicant that has been in a job for some time, as they see this as a more secure employment and therefore a lower risk of not being able to pay back their mortgage loan.
When you start applying to standard mortgage lenders, you might find that your application is declined because they are not prepared to lend to you until you have been in your job for longer. Each mortgage lender has different criteria, so it is worth checking with any lender before you start the application process.
If you get a declined mortgage then this could affect your credit report, so only apply for a mortgage if you are confident that the lender will accept you based on the length of time you have been in your role.
Mortgage lenders will also want to know whether your job involves a probationary period, such as where your contract could be terminated after the first six months, for example. Another reason that lenders are less happy to provide mortgage loans to people in new jobs is because when redundancies are made, it is often the case that the newest employees are the ones who will be made redundant first.
A specialist broker should be able to identify the lenders that are most likely to accept your application when you have started a new job, factoring in all of the other relevant information that you provide them with.
What if your salary goes down?
Similarly, if your new job means that you are taking a pay cut, you might find that lenders will not lend you as much as they would have been prepared to when you were on a higher salary.
If your new job involves different types of financial incentives like commission, bonuses or any other financial benefits then you should inform your mortgage lender to see if they include those arrangements when they are calculating your affordability.
Whilst some lenders might not count bonuses in your affordability calculations, other lenders will.
Other factors, such as how much deposit you are able to put down for the property will also be taken into account when a lender is deciding how much to lend to you, so saving up a bigger deposit will improve your chances of getting accepted.
If your salary has increased
If your new job means that you will be earning more money, then this will increase your affordability calculation, so you could be able to buy a house that is priced higher than you could previously with your lower salary.
People often wait until they start a job where they have a bigger salary before they apply for a mortgage, so that they can afford a more expensive house, or they may need to wait until they earn a certain amount before they are able to afford a property at all.
When a mortgage lender is calculating your affordability to pay the loan, they will take into account your salary, age, outgoings, outstanding debt and they will also look at your credit history.
Self-employed and applying for a mortgage?
For people that are self-employed, this often means that they need to find a specialist mortgage lender that provides mortgages to self-employed people and will accept evidence other than payslips as proof of income, such as their accounts.
It can be quite difficult for self-employed people to get a mortgage as their income is often harder to prove and does not have payslips to show the monthly salary. Some lenders require several years of accounts as proof of income before they will be prepared to lend to self-employed workers.
If you are considering moving from being employed to starting up your own business, then you should consider the impact of doing so on your future mortgage applications. It is sometimes a good idea to take out a mortgage before you become self-employed to make the mortgage application process more straightforward.
However, if you are already self-employed, there are still many lenders that offer mortgages to self-employed people, but you would need to find a good broker such as Boon Brokers to help you to find the best mortgage lender for your situation.
Getting a mortgage when you have just gone self-employed
There are certain factors that will impact whether a lender will be prepared to lend to a newly self-employed applicant. As it is difficult to project your potential future earnings, the other details that will usually be taken into account are:
- Your previous salary when you were employed
- How long you were employed for previously
- Whether you are a skilled worker with relevant qualifications/experience
- Your business strategy i.e. where your earnings will come from
- How long you have been self-employed for
If you have not been self-employed for long then a standard mortgage lender is more likely to decline your application, so finding a specialist broker is the best option in this situation. A specialist self-employed broker will be able to find the lenders that are more likely to accept you, based on your age, deposit, house value, employment status and credit history.
Switching your current mortgage when you change jobs
When you already have a mortgage but you want to change mortgage, either because you want to move home, or because you want to try and arrange a better mortgage deal, your position will change if you start a new job. If you have a different salary, this could affect the value that you can get a mortgage for. An increased salary could allow you to move to a more expensive property.
However, if you have any of the issues above, such as not being able to provide payslips, or changing to be self-employed then you will be in the same position and could find it more difficult to have a new mortgage accepted.
Therefore, it can be better to wait until you are in the new job for longer, or to apply for a mortgage well before you change job/move into self-employment.
Starting a new job will always make applying for a mortgage or any other type of credit more complicated. Moving jobs can be seen as a risk for lenders, as they want to see a history of employment and income to assure them that you will be able to repay your mortgage loan for the term that you arrange.
Whether you are starting a new career, or joining the many other people moving into self-employment, the best way to make sure that your mortgage application is accepted, is to work with a specialist broker.
If you would like to discuss your current job situation and find out how it will impact your ability to get a mortgage deal accepted, you can speak to Boon Brokers, a specialist mortgage broker with years of experience in helping people with new jobs to get the best mortgage deals.