Working on contract and mortgage

[elty]

Essentially I am working on a salaried position. I am considering moving to a contract position (maybe renewable) position because it pays more and provides better experience for my future. I am also considering buying a new home. Financially I can afford it based on my current salary, and will give me lots of headroom if I move to the contract position.

The builder has two associated mortgage agents from RBC and TD, so naturally I talked to them. They both offer 18 months of cap rate thing. They said if I apply now they will confirm my current employment information and access me in that way. They said they will not access my employment information again during the time of closing which is about 1 year later. They suggest I should get an approval first, then I can start on the new contract position. If I apply after starting on the contract position, it will be tougher for me to get a mortgage since I only have 2.5 years of experience in the field (all of them salaried).

However I talked to my cousin who was a mortgage underwriter. She said the bank will reconfirm your employment information at the time of closing, and they can invalidate my approval if something changes. She said as a underwriter she will not like an applicant with only < 1 year of contract experience. It may not be the deal breaker but I should definitely be more cautious. On the plus side my girlfriend has a stable salaried job, and we will have 20% downpayment. She concluded with 2 years of NOA I may be able to get away with it.

I am just confused who is correct. Right now my job doesn't pay very well, so I have nothing to lose by moving to a contract position (which pays 25% more on top of better experience). The contract position ends 3 months before the closing, so even if I don't get renewal I will have three months to find a new job. I am not concerned I will be unemployed, I am concerned about the mortgage should I choose to remain in a contract position.

Also, are those mortgage broker lying?

[Bullseye]

It's hit and miss whether lenders re-check employment status before close, but I would guess that the longer the period between approval and close, the more likely they are to check. They definitely don't always check, though, I was laid off before closing on my first house 6 years ago, and they never checked.

The 20% down will really help you, and if your girlfriend's salary is decent, I'd say it probably won't be a big problem.

[webworm]

Yes they will check your employment prior to closing to ensure it is permament and FT position. If you waive financing remember you have a legal and binding contract to close on that property. If you are in the same line of work then you should be fine.

[Hubster]

Hi Elty,

While not discussing a contractural position, such a scenario was discussed at length previously here: http://www.redflagdeals.com/forums/showthread.php?t=427649&highlight=hubster

All ended well with that gent moving to a better position and company and getting his mortgage fully approved ;)

I would definitley agree with the underwriters statements - that has been my experience with employment verification. Having said that, the "out of the box" lenders understand that an individual's career should not be hampered for the sake of "dead-end" long term employment. Will you be registering a business if you were to go this route? If so, I recommend you get it registered immediately so a minimum of one year history can be obtained.

Is this contract something you would be ideally renewing before mortgage clsoing, or is it for one year max? If it is renewed before clsoing then you should expect no problems. If it is not, then I assume you would be contract or job hunting? The new job will be fine as long as you are not on probation at time of closing - your employemnt letter MUST state this.

As Bullyseye said, the 20% down will buy you a fair amount of leeway. A good credit score (above 680) will also definitely help.


Sorry, all the time I have for now, more later.


Hubster

[elty]

Hi Elty,

While not discussing a contractural position, such a scenario was discussed at length previously here: http://www.redflagdeals.com/forums/showthread.php?t=427649&highlight=hubster

All ended well with that gent moving to a better position and company and getting his mortgage fully approved ;)

I would definitley agree with the underwriters statements - that has been my experience with employment verification. Having said that, the "out of the box" lenders understand that an individual's career should not be hampered for the sake of "dead-end" long term employment. Will you be registering a business if you were to go this route? If so, I recommend you get it registered immediately so a minimum of one year history can be obtained.

Is this contract something you would be ideally renewing before mortgage clsoing, or is it for one year max? If it is renewed before clsoing then you should expect no problems. If it is not, then I assume you would be contract or job hunting? The new job will be fine as long as you are not on probation at time of closing - your employemnt letter MUST state this.

As Bullyseye said, the 20% down will buy you a fair amount of leeway. A good credit score (above 680) will also definitely help.


Sorry, all the time I have for now, more later.


Hubster

The contract will end 4 months before closing if I don't get a renewal.

He said based on my (current) income I can get a 250K mortgage. Only plan to use around 220k. Downpayment is 56kish, with 30k saving and another 30k gift from parents. There is still another year to the closing date so ideally I can save another 15-20K by then. They will be used for closing, furniture and emergency fund.

I talked to the agent again and he said the bank will not verify my employment again next year. I asked what if I become unemployed (worst case scenario). He said if I don't disclose then the bank wouldn't even know, and this is a risk the bank willing to take since a 20% down mortgage is not risky. He said new home mortgage is a bit different because the closing date is usually year away. I just find his word unbelievable and doesn't really make sense. I know no people with any sense will put down 20% down payment only to default the loan, but still...