Getting a mortgage while starting a new job can seem daunting, but it's not an impossible task. In this guide, we'll provide you with essential information and insights to navigate the process smoothly.
We'll explore the factors mortgage providers consider when assessing your eligibility, such as income changes and pay rises. Whether you're a first-time buyer or considering a home upgrade, join us as we delve into the important considerations and steps involved in securing a mortgage with a new job.
You can get a mortgage if you've just started a new job, but mortgage providers consider several factors before approving the loan.
If your salary decreases after applying for a mortgage, inform your lender to prevent misunderstandings. Bonuses and allowances can help improve your standing with the lender.
If you receive a pay rise after applying for a mortgage, some lenders may reassess the maximum amount you can borrow, considering the increase in your salary.
If your income depends on bonuses or commissions, lenders may view it as unstable. Providing a contract outlining expected bonuses and commissions can help lenders assess your income stability.
It's possible to remortgage with a new job, but providing evidence of income and maintaining a good credit score is important. Consulting a mortgage broker or advisor can be beneficial.
Mitigating Changing Circumstances
You can get a mortgage when you've just started a new job – but bear in mind that there are several factors that mortgage providers consider before offering you one.
If your salary goes down after you've applied for a mortgage
Lenders may recalculate the amount you are eligible for based on your reduced income.
Therefore, it's important to notify your lender of any reduction in income to prevent any misunderstandings. Failing to inform them of the change may harm your chances of getting a mortgage deal altogether.
However, bonuses and allowances can help improve your standing with the lender, so it's crucial to factor them into your income calculations and provide accurate information to your lender.
If you get a pay rise after you've applied for a mortgage
Some lenders may be willing to reassess the maximum amount you're allowed to borrow.
As long as you notify them of the increase, your lender may ask for proof of income to ensure that the increase in your salary is sustainable and long-lasting.
A high salary can increase your likelihood of getting approved for a mortgage and puts you in a better position to negotiate favourable terms for your new home.
If your income depends on bonuses or commissions
This can be considered unstable by lenders, and it can affect the amount you can borrow.
However, if you have a contract outlining the bonuses and commissions you'll receive, lenders may take this into account. It's important to provide this information to your lender and to be transparent about any potential fluctuations in your income.
One way to do this is to let your lender know the minimum and maximum amounts you expect to receive annually. This will help your lender determine the stability of your income source and the mortgage you qualify for.
Yes, it's possible to remortgage with a new job, but there are a few things to keep in mind.
You'll need to provide evidence of your income. This may include evidence of your new employment and payslips. It may also be helpful to have a good credit score and not to have missed any mortgage payments.
Lenders would be looking at your history with your current mortgage to determine if you're a reliable borrower. If you've been able to keep up with your mortgage payments and have a good credit history, this will work in your favour.
You might want to consider speaking with a mortgage broker or advisor. They can help you navigate the process of remortgaging while starting a new job and can give you expert advice on the best options available to you.
Why would a lender reject my mortgage application?
There are several reasons why a lender may reject your mortgage application. Here are seven of them:
1. Poor credit score – Your credit history and score play a vital role in getting approved for a mortgage. A low credit score indicates that you haven't been responsible with credit in the past and may be a risky borrower.
2. Insufficient income – Lenders need to know that you can afford to make consistent mortgage payments. It's crucial to have a stable income source, and it's advisable to have a minimum of six months of employment history.
3. High debt-to-income ratio – This is the amount of your monthly debt payments compared to your monthly income. If it's too high, it indicates that you may not be able to make additional mortgage payments.
4. Unstable employment history – Lenders need to know that you have a stable income source. An unstable employment history can indicate that you may not be able to make consistent mortgage payments.
5. Little to no down payment – Putting down a significant deposit on your mortgage shows the lender that you're committed to the investment and have a lower risk of defaulting on your payments. It's advisable to have at least 20% of the property value as a down payment.
6. Bankruptcy – Having declared it indicates that you may not be able to make consistent mortgage payments. Most lenders will typically require a waiting period after the bankruptcy discharge before considering your application. During this time, it's essential to rebuild your credit and demonstrate financial responsibility.
7. Insufficient savings or assets – Lenders want to know that you have sufficient savings or assets to cover any unexpected expenses or emergencies, making you financially responsible and able to afford additional mortgage payments.
How long do you have to be in a job to get a mortgage?
Are interest rates higher for new job mortgages?
Can I get a mortgage during a probationary period?
Key Considerations When Applying
Now that you know its possible to get a mortgage with a new job, let's discuss key factors to set you on the right track;
Get your finances in order – Ensure that your credit report is accurate and that you have enough savings to put down a deposit.
Provide accurate information – Be transparent with your lender about your income, bonuses, and commissions.
Get a letter from your employer – If you've just started a new job, it's advisable to get a letter from your employer confirming your employment status, salary, and job title.
Speak to a mortgage advisor – A mortgage advisor can provide expert advice on the best options available to you and guide you through the application process.
Consider lower loan-to-value ratios – A lower loan-to-value ratio means that you borrow a smaller percentage of the property value, decreasing the lender's risk.
What determines my eligibility?
When it comes to mortgage eligibility, lenders consider several factors to determine whether you are a suitable borrower. Here are some of the key considerations:
Income – Lenders need to know that you have a stable income source to ensure you can make consistent mortgage payments. They will look at your current income and employment history to assess your ability to repay the mortgage.
Outgoings – Your existing expenses, such as car loans, credit card debts, and other financial obligations, will be taken into account when assessing your mortgage application. Lenders need to be satisfied that you can afford to make your mortgage payments on top of your other commitments.
Credit score – Lenders want to see that you have a good track record of borrowing and repaying credit on time. The higher your credit score, the more likely you are to be approved for a mortgage.
Industry of employment – If you work in an industry that has a high degree of job security, such as a government job or a tenured academic position, this can improve your chances of getting a mortgage.
Assets – Beyond your income and expenditures, lenders also consider any assets you may have, such as savings, investments, or property. Having more can improve your chances of being approved for a mortgage, as it indicates you have a strong financial position and can handle unexpected expenses.
Bankruptcy – If you've declared bankruptcy in the past, lenders may see you as a risky borrower and may refuse to offer you a mortgage altogether until you have a clean credit history indicating your recovery from it.
Lender Views on Employment Types
Here's a breakdown of how lenders view some types of employment:
Self-Employed
Being self-employed can make it more challenging to get a mortgage as lenders may see your income as unstable. You'll need to provide months or years of accounts and tax returns as proof of income to improve your chances of getting approved. Self-employed individuals often face difficulties in obtaining mortgages because their income is more challenging to prove than that of traditional employees.
Unlike salaried employees who have payslips and employment contracts to show their earnings, self-employed individuals need to provide alternative evidence of their income such as bank statements or tax returns.
Yes, but you'll need to provide evidence of income and show that your business is profitable or has a reliable income source.
Contractors
If you're a contractor, lenders will want to see evidence of your income, such as contracts and payslips, for at least six months. Lenders may also ask to see tax returns from the previous two years. They'll be looking for stability in your income stream and may consider the length of your contract to determine the mortgage terms offered.
Part-Time Workers
Part-time workers can get a mortgage, but lenders may have stricter criteria for this employment type. Lenders will look at your income, expenditure, and ability to make consistent payments, and may require proof of at least six months' employment history.
If you work part-time, it's advisable to have other assets or a supplementary income source, as these can help improve your chances of getting a mortgage.
Temporary Workers
Temporary workers, including seasonal workers and those on fixed-term contracts, may find it more challenging to get a mortgage as their income source may be irregular. Lenders will require proof of income, similar to contractors, and may ask for evidence of future employment opportunities or contracts to support their applications.
