Can You Quit Your Job Right After Getting a Mortgage?

Getting approved for a mortgage is an exciting milestone After months of paperwork, credit checks, and anxious waiting, you finally have the keys to your new home Now, it’s time to settle in and make it your own. But what if you’re considering leaving your job soon after closing on your mortgage? Will quitting your job cause problems with your new home loan?

This is a common question for new homeowners. Theoretically, you can quit your job at any time after getting a mortgage, as long as you keep making payments. However, doing so can impact your loan in a few key ways. In this article, we’ll explore the potential risks of resigning right after closing so you can make an informed decision.

How Mortgage Lenders Evaluate Employment

When you apply for a mortgage lenders want to see consistent income to ensure you can repay the loan. They typically prefer at least two years of steady employment in the same field. Sporadic job changes or employment gaps can raise red flags.

Lenders also look at your current income level. So if you take a pay cut with your new job, it could negatively impact your ability to qualify for a mortgage in the future.

Once you have the loan, lenders assume your financial situation will remain relatively stable. Quitting your job without another source of income calls that assumption into question. So most lenders will want an explanation if you voluntarily leave your job shortly after closing.

The Risks of Quitting Your Job After Closing

While quitting won’t automatically put your new mortgage in jeopardy, it does carry some risks:

• Your credit could suffer: Income is a major factor in credit scoring models. Quitting your job may result in a lower credit score, making it harder to qualify if you need to refinance or get a new mortgage later.

• Difficulty securing a new loan: Lenders may view you as a higher risk if you voluntarily resigned from your job soon after getting a mortgage. You may need to provide more documentation or get a cosigner when applying for new credit.

• Loan default: If you deplete your savings and can’t make payments, you could face foreclosure. This is an absolute worst case scenario, but it’s important to have a financial backup plan.

• Mortgage acceleration: Some mortgages contain acceleration clauses allowing the lender to demand full repayment if you default on the loan terms. Quitting your job could trigger the clause, but it’s not guaranteed.

The risks are lower if you line up a new job before leaving the old one. Even then, underwriters may want proof of your new income source and start date. The key is avoiding large gaps in employment or income.

Tips for Quitting Your Job After Buying a Home

If you do plan to resign soon after closing, here are some tips to protect yourself:

• Save up a robust emergency fund that covers 6-12 months of expenses, including your mortgage. This provides a cushion if you go a period without income.

• Pay down other debts so you have lower monthly obligations during unemployment.

• Get pre-qualified for a mortgage based only on your personal income/assets, in case you need to refinance later without a co-borrower.

• Line up new employment and provide the offer letter to your lender before giving notice at your current job.

• Consider keeping your old job at least 6-12 months after closing on the mortgage before making a change.

• Refinance into a more stable loan like a VA mortgage that doesn’t require employment verification before quitting.

• Notify your lender in advance so they understand your situation and can suggest alternatives if needed.

The most important thing is maintaining your mortgage payments. As long as you do that, voluntarily leaving your job shouldn’t directly violate mortgage terms. Still, it’s smart to consult your loan officer before making major employment changes after closing.

Responding to Lender Inquiries After Resigning

If you do quit your job soon after getting a mortgage, don’t be surprised if the lender contacts you seeking an update. They want to verify your continued ability to repay the loan.

Expect to provide documents like:

• Bank statements proving you have reserves to cover the mortgage
• The employment offer letter from your new job
• Tax returns if you plan to rely on a spouse’s income
• Proof of additional income sources like rental properties, side businesses, investments, etc.

Draft a letter addressed to the lender explaining your job change in advance. List the reasons for quitting, your plans for new employment, and how you will continue affording the mortgage.

While their inquiry may feel intrusive, try to respond promptly and fully. This maintains open communication and reassures the lender you are acting in good faith.

Alternatives to Quitting Cold Turkey

If the risks of resigning immediately after closing feel too great, you may want to consider other options, like:

• Negotiating a later start date with your new employer
• Asking for unpaid time off from your current job
• Transitioning to part-time or freelance contract work
• Having your partner cover more shared expenses temporarily
• Accessing retirement funds without penalty using 72(t) distributions
• Downsizing to a less expensive home before quitting

With some creative planning, you may be able to resign on your desired timeline while safeguarding your new mortgage.

The Bottom Line

While you won’t necessarily lose your home by quitting your job after closing, it can jeopardize your loan and finances if done recklessly. Have an open conversation with your lender, line up alternative income sources, and bulk up your savings before taking the leap. With adequate preparation, you can prioritize your career or other life goals without putting your new home at risk.

The key is showing lenders you can maintain your current standard of living and mortgage payments, even after leaving your job. As long as you can demonstrate stability, most lenders will respect your decision to change careers or take a break from work after securing a mortgage.