If you have changed jobs more than a couple of times in the last 12 months, you might find that it is a bit harder to get a mortgage than you might have anticipated. Even if you have a high credit score, good income, low debt ratio, and plenty of reserves, that job instability can really hurt your chances at getting approved. The good news is that there are exceptions to the rule when it comes to applying for an FHA loan. If you have frequent job changes and proper proof to show why you did it, you might be able to get approved for the loan that you want.
Explain the Reasons
The first step is to show that you did not change positions because you were forced to due to being fired or laid off or that you did it because you were bored. You need to show the lender that you changed jobs because you were better able to further your career by doing so. A few examples of why you would change jobs include:
- You received training to take a higher position within the same company
- You recently received a college degree that enabled you to take on a higher paying and more lucrative job
- You found a job with the same income but better benefits
Each of these scenarios shows the lender that you changed jobs simply to better yourself. If you received training or some type of degree, you did it to go further in your career. If you changed jobs because of the benefits, you did it for yourself and your family, which can translate into financial benefits down the road.
Show your Proof
You always have to have reasons for anything that occurs in your financial life when you apply for a mortgage. The lender is going to ask you questions that you never dreamt of being asked, but it is simply to ensure that you are a good risk for them. Consider how much money they are putting out on the line here – let’s say your mortgage is for $200,000. The lender needs to make sure that you are capable of paying that $200,000 back despite the guarantee that the FHA offers. Lenders do not want to rely on getting paid back by the government – they want the borrowers to be able to repay them.
Your reasons can be written in an official Letter of Explanation, but having concrete proof of the changes that you made and why will speak volumes to the lender. If you increased your income by changing jobs so many times, show the proof with your paystubs, W-2s, and 1040s. Let the lender see for himself that your income was on an upward swing the entire time. If you changed jobs because of the benefits, say for example, your medical insurance was significantly cheaper after changing jobs, you can show the lender the financial responsibility in making the change. It was not because of any type of negative reason – it was simply to better the financial position of your family.
Remember that you will need concrete proof of any claim that you make. If you changed jobs more than 3 times in 12 months, any lender considering you for an FHA loan is going to want substantial evidence of the reasons you changed and how it has impacted your finances. If you cannot wait until you are at your latest job for at least 12 months, be prepared to provide plenty of documentation to the lender. This is not to say that you will not get a loan, because many lenders to do give FHA loans to those that have frequent job changes – you just have to have the right reasons and adequate proof to make it work.