So, you hate your job. But you want to buy a house. What should you do? Some buyers believe you can quit your job after the mortgage in principle has been granted. But is this really a good idea?
A ‘mortgage in principle’ is a document that states a lender is prepared to grant you a mortgage loan. Thus, some buyers believe, as you have passed the credit checks, changing jobs will not affect your mortgage pre-approval.
Others argue, lenders do perform additional random credit checks at a later date. And so, changes in your financial situation may jeopardise your mortgage pre-approval. Also, you might not pass your probation period when starting a new job.
Can you change your job after you get a mortgage in principle?
The correct answer is to look at your lender’s terms and conditions. Every lender has its own rules. Some lenders are more lenient than others, and will not seek further information about your employment status after you pass the initial credit check.
However, many lenders require you to declare any changes in your employment and financial situation.
Remember, a lender approves your loan based on your income at the time of application. If your income decreases, you might have problems repaying the debt in future.
How changing your job could affect your mortgage in principle
1) What if you find a higher paid job?
If you secure a higher paid job, lenders are more likely to increase the amount of your loan. As you are in a better financial position, you can afford to make higher monthly mortgage repayments.
2) What if you find a lower paid job?
If you find a lower paid job, lenders get concerned. A lower income reduces your ability to make mortgage repayments. Your mortgage in principle may be re-assessed. Don’t get upset. Instead, question if you really can afford a mortgage on a reduced income.
3) What if you become self-employed?
Credit checks are stricter for the self-employed because their income is scrutinised closely. Self-employed people, like my husband, must submit past tax returns. Buyers with no tax documentation supporting their self-employed income may struggle to get a mortgage loan.
4) What if I receive bonuses and / or commission?
Bonuses and commissions fluctuate. From experience, some lenders require evidence of the bonus and commission payments over a set period. Sometimes, bonuses and commission are not accepted as part of your income if you are new in a role.
A word of caution
It’s true, after your mortgage in principle has been granted, some lenders do not perform additional credit checks. You could get away with changing your job without anyone knowing. But I do not recommend this. Many lenders do perform random credit checks. You could be next.
It’s best to change your job after you legally own the property. Waiting a few months in a job you hate is difficult. But, voiding your mortgage in principle is worst. You decide.
So, do you think quitting your job jeopardises your mortgage in principle?
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