Don’t Move Money
When a lender reviews your loan application, one thing they are concerned about is the “seasoning” of your funds. If you have money that has only been in your account for less than 2 months, the lender will need to “source” the funds, meaning they need to track where it came from, how it got there, to make sure that it is not fraudulent.
You may be asked for two months statements for any of your assets, including checking, savings, money market funds, CD’s, stocks, mutual funds, 401K and retirement accounts. If you move money between accounts within 2 months of the time you apply for your loan, especially if there are large deposits and withdrawals, then the lender may request more documentation of your funds.
The mortgage underwriter who approves your loan will probably request a complete paper trail of the large withdrawals and deposits, depending on how much assets you have. If you have more than enough for your down payment and several months of your house payment, none of this may be any issue at all.
However, if you have just barely enough to buy the house, then you might need to come up with cancelled checks, deposit receipts, and other evidence that the money is actually yours. What they are looking for is any evidence that the money is not yours.
I’ve been involved in escrows when the borrower had moved money, and it caused everything to be delayed for several days while we waited for the paper trail to be provided by the borrower.
If you have money at Bank of Hawaii and you decide to transfer your money over to First Hawaiian bank, make sure you keep the deposit receipt, cancelled check, and anything else you have that can prove that it was your money to begin with.
The Effect of Changing Jobs
How Changing Jobs Affects Buying a Home
Usually changing employers will only affect your ability to qualify for a loan unless you are changing the line of work you are in. If you are in construction and then you get a job in marketing or something other than construction, it could mean that you won’t be able to get a home loan for 2 years. Generally, you need 2 years of history in any field.
However, if you work in construction and you get a different job in construction, that would be fine. In fact if you were an accountant at a construction firm, then you got a job as an accountant at a marketing firm, that would be fine too. The main thing is that the lender wants to make sure you’re doing a similar job.
If you are an hourly employee and you don’t work overtime, changing jobs should not create any problems unless you change to a different field. If you change from regular hourly to hourly plus bonuses or commissions, then that could be a problem since your new job doesn’t guarantee the commissions or bonuses.
If you receive commissions, changing jobs could mean you don’t qualify for a loan for 2 more years. The lender wants to see that you have a history of earning the commissions because a lot of commissioned employees never make it past the first two years of their job. If you change from one commissioned job to another, the lender has no way of knowing whether you’ll make it, so they won’t give you a loan.
I have never heard of a lender that will make an exception to this rule, so be very careful about switching jobs and move to Hawaii! Don’t assume anything. Tell your lender everything about your new job before you make plans to move or plans to change jobs! Even if you have the best paying commission job in Hawaii, you’re still not going to get any commissions to count toward your loan qualifying unless you have 2 years history.
Bonuses work in a way similar to commissions, except that may not always be earned solely by you. Sometimes a company will give a bonus based on the company’s performance overall. Therefore, the lender wants to see if the company has a two year history of paying bonuses in order to use that income to help you qualify.
Sometimes, a lender will ask for a Verification of Employment, or VOE, which allows the employer to state how much the bonus will be. Once in a while if you have slightly less than two years history of bonuses, the lender will allow the VOE to state future bonuses and count that toward your income. This is rare.
Make sure when you are thinking about taking a job with bonuses that you realize the lender may not allow that income to be used in qualifying.
If you earn an hourly income but work less than full time, changing jobs could hurt your chances of getting a loan. The lender would have no way to know how many hours you will work each week on your new job, so chances are they will ask your employer for a VOE (verification of employment) and ask how many hours you will work. This is shady ground and it’s better to avoid it. Stay at your current job and the lender will give you an average of whatever you’ve worked over the last year.
Since employers can pay overtime hours in different ways, lenders use an average of your year to date overtime income. So if you change jobs and you receive overtime on your new job, it can’t be averaged because you don’t have history.
Stay on your present job and your lender will give you credit for overtime income as an average from the last 12 months.
Changing to self employment means you can’t get a mortgage for two years. Every lenders needs you to have a two year history of self employment to get a loan at all. Even if you didn’t make any money paper, lenders can usually give you a loan if you have two years of history.
Sometimes people think that if they incorporate they won’t be considered self employed, but lenders can see right through that. Unless a corporation has other employees and has been around for more then two years, a lender can tell right away that it’s just a paper corp and you’ll still be considered self employed.
Also, being self employed myself, I know that the first year or two of being self employed is not usually profitable, so you could have problems making your payments.
No Major Purchases of Any Kind
Don’t Buy a Car
If you buy a car, it shows up on your credit usually within a few weeks. A car payment is often the 2nd largest payment on a person’s credit report, the 1st being the mortgage payments. A $400 car payment will often push someone over the limit of qualifying, and I’ve been with plenty of people who regretted buying a car just a few weeks before buying a house.