Buying a new home is an extremely expensive endeavor for anyone, but buying when you've just started a new job can be even more of an uphill climb. With the prices of homes creeping up every year, the criteria required to secure a mortgage can be more challenging.
And those who are just starting fresh with a new job may come across additional hurdles that experienced buyers and those who are secure in their jobs might not.
For starters, income might be in its infancy. After all, it's typical for employees to start near the bottom and have to work their way up the ladder to solidify themselves in their company. As such, the money coming in at the moment might not be as high as it may be in the future, making it more of a challenge to come up with a sizable down payment.
Further, those just starting out in the workforce may have a ton of student loan debt that much of their newly-acquired income will be going towards paying down. Saving can, therefore, be a lot more difficult with a lot of debt on the books. And finally, first-time homebuyers don't have a home to sell, which means they have no proceeds to be able to put towards a new home purchase. Going into the real estate market new without any previous collateral puts them in a challenging financial position.
But while there are certainly some challenges that first-time homebuyers looking to buy with a new job will face when entering the housing market, that doesn't mean buying a home in WA, OR, CO, ID, or anywhere else in the country is impossible.
With a little info and insight into the ins and outs of the real estate and mortgage industry, and a partnership with the right Seattle mortgage company, you can still buy with a new job and be a first-timer successfully.
How Much Employment History Do You Need To Secure A Mortgage In WA?
Generally speaking, lenders typically like to see at least two years of employment history on mortgage applications. The longer the employment history, the better the picture in terms of what type of income a borrower brings in and how steady the work is.
Having said that, not all two-year employment histories are created equal. Of course, lenders would probably prefer to work with a borrower who's been at the same job for ten years making a great salary. There are also plenty of borrowers who may have been in the workforce for the same amount of time but have made plenty of lateral moves within their industry, which is also acceptable.
But there are other scenarios that a lender may accept when reviewing a borrower's loan application.
For example, you may have been in college or university for three or four years, working diligently to obtain your degree or diploma. In the meantime, you may have to work an odd side job here and there just to give you a little pocket money. You may have even done some volunteering or been part of an internship as part of your studies.
While these types of employment may not have been steady or brought in a lot of money (if any at all), they can still be included as part of your employment history.
So, even though you may have only been at your current full-time job for six months, your lender will consider the full picture when assessing your track record in employment.
All your lender really wants is to be certain that your income is reliable, steady, stable, and will be adequate enough to cover your monthly mortgage payments.
What Does It Take To Get Approved For A Mortgage?
Conventional lenders look at a number of factors when they're assessing mortgage applicants, including the following:
Credit Score
One of the first things that your lender will look at is your credit score. If you've had a credit card or some sort of loan in the past, then every payment you made to pay down your balance will be calculated to determine your credit score. If you've been diligent about your payments, your score should be decent.
But if you've been late on a few payments in the past, your score might not be as high as it could. Generally speaking, conventional lenders like to see a credit score of at least 650 before approving a mortgage application, though other factors will play a role as well.
Debt Load
Your lender will want to make sure that you don't already have a full plate when it comes to debt. If your debt load is too high, you might have trouble keeping up with another loan in the form of a mortgage. More specifically, your debt will be weighed against your income. So, the more money you make, the more you'll have to pay against your debts.
The best way to determine whether or not your debt load is too much is by calculating your debt-to-income ratio, which is simply your monthly debt obligations divided by your gross monthly income. Typically, lenders don't like to see anything above 43% before approving loan applications.
Down Payment
The amount of money you're able to put towards your down payment will determine how much of a loan you need. Obviously, the higher the down payment, the smaller the loan you'd need, which is a good thing in the eyes of the lender.
Income
Your income will clearly play a key role in your ability to secure a mortgage. You're going to need to be able to bring in enough money to not only cover your mortgage payments, but also all of your other debt obligations.
Steady Income Is What's Important
A new job doesn't have to be an obstacle for first-time homebuyers. In fact, it shouldn't really be much of a deterrent at all, as long as other factors are healthy.
As long as your new job pays a decent salary that's steady and predictable, that matters more than simply having a job that you've been at for years.
For example, getting paid a regular hourly wage or salary is better than a job that pays mainly through commissions. Further, your job status also plays a role, as a full-time employee will be less of a risk to the lender than someone on contract or who's self-employed. As long as that new salary is adequate enough to support the mortgage payments, that's what truly matters.
Of course, other factors play a role as well, which is why the mortgage lending sphere is multifaceted. It's not only your job that makes you either qualified or unqualified to secure a mortgage. Your credit score, debts, assets, and job status are all looked as well in addition to your income to paint the full picture of what you'd be like as a borrower.
What Loan Options Are Available To You?
No two homebuyers are exactly alike, which is why there are different mortgage products available. What may be suitable for one may not be suitable for another, and vice versa.
For first-time homebuyers who have recently started a new job, certain loan options might be easier to get approved for.
Conventional Mortgages
Usually, at least two years of employment history is needed as part of the overall criteria to get a conventional mortgage. However, less than two years is also acceptable, as long as all other factors involved in your financial profile are healthy to make up for a lack of a lengthy employment history.
FHA loans
Mortgages back by the government tend to be the go-to mortgage products for first-timers, especially those who are just starting out in the working world. That's because the criteria for FHA loans are less stringent compared to those associated with conventional loans.
Not only can you potentially get approved with a credit score of less than 650 (the minimum required for a conventional loan), you might also be able to land a mortgage if your job is less than two years old.
In fact, the FHA's current guidelines stipulate that you don't have to have any prior history in the position you currently hold. But the lender will still want to see some sort of documentation showing any previous jobs you've had (even part-time ones you held in school), your education, military service, and so forth.
Further, the lender will assess how likely you'll remain at your current job and continue at your current salary (or better) into the future.
VA Loans
If you've been in the military or National Guard, you may qualify for a VA loan, even if you have less than two years of employment at your current job. Like FHA loans, they're easy to get approved for, as long as you meet the eligibility requirements.
USDA Loans
USDA mortgages are geared towards those who are looking to buy in rural and suburban areas and aren't able to qualify for a traditional mortgage. They offer many benefits, including zero down payment and flexibility with credit score requirements. They're also lax about employment history.
Final Thoughts
Going into the real estate game with no house to sell and a new job can definitely be a bit of a challenge for first-time homebuyers. But the task doesn't have to be an impossible one.
By working with the right mortgage lender, there are ways to secure the mortgage you need to finance your new home purchase in Washington, Oregon, Colorado, Idaho, or anywhere else across the nation.
