Here's What Happens When You Switch Jobs Before Your Mortgage Closes

Most people who want to buy a home can't afford to do so outright. That's what mortgages are for.

In 2022, U.S. mortgage debt rose to over $11 trillion, according to Experian. So if you're borrowing money to buy a home, you're clearly in good company.

Now there are different factors that mortgage lenders look at when deciding whether to approve home loan applications. One factor is your credit score, which speaks to how risky a borrower you are based on your payment history, among other things. Another factor is your debt-to-income ratio, which measures your outstanding debt relative to your earnings.

A third important factor that mortgage lenders look at when approving home loan candidates is income. Your lender will need to make sure your earnings are high enough to support the loan amount you're looking to get.

Not only will your mortgage lender check to make sure you earn a high enough income, but it will generally want proof of a steady income. To that end, you may need to provide a letter from your employer confirming that you're a full-time worker (if you're self-employed, you may need to provide copies of contracts showing that you expect to have ongoing income coming in).

But what if you're offered a new job during the process of closing on your mortgage? If it's a good opportunity, you may want to take it.

But you should know that in some cases, switching jobs could put your mortgage at risk. So it's often better to wait until your mortgage is finalized to make a job change.

Why a job switch could compromise your mortgage

It's important to mortgage lenders that they get repaid, since they're in the business of loaning out large sums of money. If you switch jobs before your mortgage closes, your lender might worry that your new role won't work out, and that you'll end up not being able to pay your mortgage. And if your lender is worried enough, they might pull your loan offer.

That said, a job switch may not be problematic under these circumstances:

• You're earning the same amount at your new job as you did at the job you had when you applied for your mortgage, or more
• You're taking a new job within the same field, or the same role at a different company

Mortgage lenders aren't really interested in your career. But they are interested in getting paid. If your income doesn't drop in the course of a job change, your lender may be okay with the fact that your role has changed.

Similarly, if you're going from being an accountant at one firm to doing the same exact type of work at another, your lender may be inclined to feel that your new job is a stable one for you. But if you're going from being an accountant to working in advertising, they might worry that you're jumping into a completely new field and that your staying power there is questionable.

You may want to talk to your lender before making a move

While you're not obligated to ask your mortgage lender's permission before accepting a new job, you should know that in some cases, a job switch could make it so your lender withdraws their offer. To prevent that scenario, call your lender and talk things out if you're thinking of changing jobs. Explain the details of the switch, including those related to salary, and see what your lender says.

If you are going to change jobs, expect to have to provide a letter from your new employer mapping out your salary and projected term of employment. Your new employer may need to attest to the fact that it intends to keep you on board as a permanent employee, for example.

All told, it's usually best to not make any major financial changes when you're in the process of trying to finalize a mortgage -- and that includes a job switch. But if your job change can't wait, know that your mortgage isn't automatically doomed, and that talking things out with your lender is a good idea either way.