If you’re in the middle of applying for a mortgage and decide to switch jobs, you may encounter some challenges.
This is because lenders look for financial stability. They’re looking for someone with a healthy credit history, good spending habits and long term, secure employment.
In this article, we’ll explain how being in a new job or transitioning into a new role can impact your home loan application.
What is considered a ‘new’ job?
Most lenders consider a borrower who has been at their current job for less than a year to be new.
Naturally, this varies between lenders, and there are some who prefer applicants who have been employed at the same organisation for at least two years.
Regardless of your situation, being in a new job can wave a little red flag to some lenders. It doesn’t mean you won’t get a mortgage, but it can be an obstacle.
I have a new job – can I apply for a home loan?
Yes, just because you haven’t been at your current job for long, it doesn’t mean that you are locked out of all home loans.
However, your options are likely to be more limited as many lenders may perceive you as being risky compared to someone with consistent, long-term employment.
You might also be interested in: Making an offer on a home
How does having a new job impact my home loan approval?
The extent to which a new job will affect your ability to get approved for a home loan will vary between lenders and is based on a number of factors. These factors may include:
The length of time you’ve been at your new job (i.e. there’s a difference between 2 months and 10 months)
Whether you change jobs often
Whether you are staying in the same industry or moving to a different field
The length of time you’ve been in your current industry
How borrowers in your industry typically handle home loans
How you are employed (e.g. full-time, part-time, casual, self-employed).
While you may have found a new job that pays better than your previous one, this doesn’t guarantee success and stability for you.
There’s a higher chance that you won’t love your new job or it won’t work out for some other reason.
This could result in you having to find another job again which could potentially negatively impact your income, making it harder to afford home loan repayments.
Are there lenders who will approve borrowers with new jobs?
Yes, not all lenders require home loan applicants to have had their current job for over a year.
There are lenders who specialise in providing loans to borrowers who may have unconventional or higher-risk situations (e.g. poor credit or inconsistent employment history).
Some lenders also just won’t necessarily see a new job as a risk if the borrower is otherwise financially responsible.
It’s common – particularly among young people – to switch jobs more often to chase career opportunities and higher compensation.
You might also be interested in: Real estate investment tips for beginners
How can I improve my chances of getting a mortgage if I have a new job?
Here are some things you can do to improve your chances of getting approved for a loan while being in a new job:
Demonstrate good savings habits: being financially responsible and having strong savings habits can build trust between you and the lender. Lenders like to see borrowers with genuine savings
Have a good credit history: making sure your credit score is as high as possible can make you seem like a lower-risk borrower
Be honest: as tempting as it may be to embellish your employment history, don’t mislead your lender about how long you’ve been in the job. You should also be upfront if you are planning to change jobs during the process of applying for the home loan
Get the backing of your boss: a letter from your new employer supporting your salary claims and job security can provide a little more assurance to the lender
Have a stable career history: if you tend to stay in jobs for at least a year or two, you are more likely to be viewed positively
Wait it out: if you aren’t in a rush and think you may have better home loan odds down the track, it may not be a bad idea to wait until you are less new to your job.
Can I change jobs in the middle of a home loan application?
If you have just applied for a home loan and are awaiting approval, it’s generally unwise to move to a new job.
This is because the lender is basing their approval decision on the information you have provided them in your application.
So, they'll assume that you are still in the job that you listed on your application.
If you have been offered a new job, it’s smart to discuss this with the lender to avoid appearing like you have provided them with false information about your employment.
While awaiting formal unconditional home loan approval, making major financial or career changes can have a negative impact. You may wish to consider waiting until after you have secured the home loan before switching jobs.
However, some lenders may be willing to approve your loan before you commence your new role if you can demonstrate a strong history of financial stability and employment.
Additionally, if you are switching to a new job to enjoy a higher salary or improved work conditions, this may be deemed more favourable than switching jobs due to you being fired, for example.