What Happens If Your Income Changes Before Closing?
Getting approved for a mortgage is an important milestone, but the financial review does not necessarily end once you receive an initial approval. Lenders may verify certain information again before closing, including your employment and income. If your income changes during this period, it could affect your mortgage approval, depending on the circumstances.
Why Income Still Matters Before Closing
Your mortgage qualification is based partly on the income documented during the application process. Lenders use this information to determine whether your income meets the requirements for the loan and whether your monthly obligations are manageable.
Because closing may occur weeks after the initial application, lenders may perform additional verification before the loan is finalized.
Not Every Income Change Is the Same
A raise or promotion may have a very different effect than reduced hours, a change from salary to commission, or leaving a job entirely. Starting a new position may also require additional documentation.
Even when a career change appears financially positive, the lender may need to review the new employment arrangement before proceeding.
Tell Your Loan Professional About Changes
If your employment, hours, compensation structure, or income changes before closing, communicate with your mortgage professional as soon as possible.
Do not assume that a change is too small to matter. Providing information early gives the lender an opportunity to determine whether additional documentation is required.
Avoid Making Unnecessary Career Changes
When possible, the period between mortgage application and closing is generally not the ideal time to make major employment changes without first discussing them with your mortgage professional.
If a change is unavoidable, keep documentation related to your new compensation and employment.
Stay Financially Consistent
Income is only one part of your financial profile. Large purchases, new credit accounts, additional debt, and unexplained changes in your finances can also create additional questions before closing.
Your financial situation at closing should remain consistent with the information used to approve your mortgage. Staying in communication with your mortgage professional and reporting changes promptly can help prevent unexpected complications as you approach the finish line.
When you’ve finally found the home you’re looking for at the right price, it’s easy to think that the hard part is over; however, there’s still a lot to do in order to ensure your purchase goes through without a hitch. If you’re tying up the loose ends on your home purchase, here are some things you should do to avoid any unnecessary delays.