It is no secret that the pandemic has created a lot of fluctuation in the employment market. From job losses to people re-evaluating what they want to do for work, there’s lots of change… to say the least. How does change in one’s employment situation affect their ability to secure a mortgage though? This month’s stories are all centered around employment and how lenders evaluate these types of changes and dispel some of the myths surrounding them.
Jonas is a software developer here in Ottawa. He was working for one company when we started our mortgage process but right as he was ready to submit an offer on a home he loved, he was provided an opportunity at a new company. In most cases, we would suggest that he not change companies until after the closing date. In Jonas’ case though, the opportunity was too good to pass up.
We worked to show the lender how Jonas’ career transition will still make sense in the client’s deal, even though he won’t have a long employment history with the new company. We demonstrated his previous work history was all in the same industry. His move from one company to the next had been for the purpose of increased income and we were able to provide a copy of the offer letter from the new employer alongside an updated letter of employment (stating no probation) and paystub prior to closing.
With only having worked for the new company for a month when we closed his deal, we were still able to position this large change in Jonas’ situation positively. As a result, Jonas was still attractive for the lender and we were able to dispel the myth of having to work for a company for two or more years to get a mortgage.
Another variable tied to employment is employment insurance (EI) which is paid into so it’s there to use if and when you need it. That said, it does carry a bit of a negative stigma when it comes to lending but it doesn’t have to! As long as the career history is consistent and makes sense, there is typically a solution we can find. For example, our client Phoebe works for a landscaping company completing gardening in the summer and snow removal during the winter. There are a few months in between those seasons however where Phoebe is not working.
As per her entitlement, she can qualify for employment insurance to bridge the gap between those working months. Since she’s been doing this for several years, it’s easy to show her consistent income trail of work-EI-work, etc. Using a two-year average, a current letter of employment, and year-to-date earnings (in whatever season she’s in), we can establish a reasonable income to get her a mortgage. It was due to this consistent history that we were able to dispel the myth of workers on EI not qualifying for deals.
Finally, we arrive at Sinead who is a personal support worker (PSW) in the very high-demand health care industry. She holds a permanent, part-time position which guarantees her 30 hours per week and she also has the ability to pick up additional shifts, work overtime, and earn hourly premiums working evenings, overnights, and weekends. She typically does work more than her minimum 30 hours but has only been in her position for 14 months.
In Sinead’s case, we were still able to get her and her partner approved. We used more than the guaranteed 30 hours, even though there was less than a two-year history, by showing higher earnings in one tax year combined with the current year-to-date earnings. Since this second amount was very similar to her previous year’s gross income, it provided the lender the confidence they needed to proceed with Sinead’s deal.
By asking the right questions and looking for the right information, we were able to dispel the myth that you always need two years’ worth of employment history AND that you can’t use overtime income to help purchase your home.
Contact the Kyle Miller Mortgage Agent team to learn more about how various employment aspects impact the mortgage application process. We’ll take the time to understand your situation, explain all the different pieces of the puzzle, and provide you with the best options!
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