How Your Employment Effects Your Ability To Secure A Mortgage

The idea of home ownership is a dream shared by many. To accomplish this goal, the average person spends a great deal of time focusing on improving their credit score and saving money. What a number of people don't do is think about their employment. Even if you have excellent credit and more than enough for a down payment and closing costs, your employment status can still have an effect on your ability to get approved for a home loan.

Salaried Vs. Hourly

While it won't necessarily determine an approval, whether you are a salaried or hourly employee will have an influence. If you're an hourly employee, you should prepare yourself for a little more scrutiny than a salaried employee might face.

First, mortgage companies sometimes look at salary income as more stable because it is thought to be a guaranteed amount that doesn't change based on the number of hours you actually work. With an hourly employee, as their schedule changes, so does their pay. For an applicant looking to secure a mortgage that is on the higher side of their affordability calculation, an hourly position might create a challenge.

Length Of Employment

Mortgage companies equate risks with consistency. To put this into perspective, consider two applicants, both with 15 years of employment history, for instance. Applicant A has been with the same company and applicant B has been with 5 different companies during this period.

Some lenders will look at Applicant B as being more of a risk. The fact that they have switched roles so frequently means that there is a good chance that the individual might leave their current role and look for a new one after the mortgage has been approved. The fear with this is that the person might fall behind on their mortgage payments while looking for a new job.

Overtime And Bonuses

If you are looking to have your overtime and bonus pay factored into your employment income, you might not want to depend on this for an approval. When a mortgage company reviews employment income for an approval, they aren't just looking at your last pay stub. They are looking at your average over a certain period of time.

If you only get overtime two months out of the year or an annual bonus, it isn't considered regular income. Make sure you are basing how much house you can afford on your regular income, not these periodic payments.

When it comes to applying for a mortgage, the more you know, the less stressful the experience. Make sure you are doing your research on every aspect of the mortgage application process for the best outcome. Click here to check it out and learn  more.