I have been a mortgage loan originator for over 15 years. Throughout that time, I have regularly worked with first time home buyers. Buyers come to the home buying process for the first time from a variety of circumstances. Some have saved for years to have a sufficient down payment, while others are ready to write the last rent check and become homeowners. Recently, I have been working with an exciting group of young professionals who are completing either business school (receiving an MBA) or law school (newly minted lawyers). These folks are ready to buy their first home and in nearly every circumstance, they want to buy and move in before they start their new job. Often they contact me because they have been told that they must start their new job before they can close on their new home purchase. The question they ask me is whether a lender will allow them to close on a new mortgage before they start work. My answer, in nearly every situation, is “yes,” if you meet lender guidelines. Let’s talk about those guidelines or the rules that get you into your new home before you start work.
A quick primer on mortgages before we answer the question this post poses. In the broadest possible sense, there are three kinds of mortgages, government (VA and FHA), conforming conventional (these are the Fannie Mae and Freddie Mac loans), and Jumbo loans (these are loans larger than the conforming limit – $417,000 in most places, but higher in select markets). In varying degrees, it is possible to close on all of these loan types prior to beginning a new job.
Lenders will allow you to close on your mortgage up to 60 days prior to starting your new job, when all of the following are present:
1) Purchase transaction
2) Primary residence only (no second homes or investment properties)
3) The future income must be documented with a non-contingent offer and/or contract from the new employer that states all the pertinent information (start date and salary).
4) The offer/contract must be signed by both the new employer and the new employee (borrower).
5) The new job must start no later than 60 days after closing.
6) Additional reserves are required – reserves are funds in your bank account sufficient to cover your principal, interest, taxes, insurance, and HOA, if applicable (lenders call this PITI). For VA and FHA loans, the borrower must have 3 months reserves to cover PITI and all other monthly debts (from the credit report). Conforming conventional loans will require 6 months of additional reserves beyond reserves already required for the loan. Jumbo lenders vary on reserves, but will require as few as two months and up to 6 months beyond required reserves for the product selected.
The ability to close on a new home prior to starting work is a great benefit to busy, new professionals who will need to devote their full attention to the new job from day one. Lenders have made it possible for borrowers with non-contingent offers and employment contracts to close on their loans. Please let me know if I can help you with this unique situation.