Can I get a mortgage with a job offer letter and no paystubs?

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Mortgage and Lending with Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, NMLS #138061 MMCD #1141
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Can I get a mortgage with a job offer and no paystubs?

 

Yes.  Yes.  YES.

 

     I just received a call from a Realtor regarding a buyer I've pre-approved that submitted an offer on one of her listings.  First off, there was a bit of pleasant shock on the other end of the phone that I'm answering the phone on the Sunday evening of a holiday weekend, but after we got passed that, she posed the following:  "I'm not questioning your ability to get a loan done, but I just had a file fall through last month because the mortgage guy thought he could use a job offer letter and later found out he could not".

 

     In fact, with a job offer letter, a buyer CAN buy a house.  This is common with many professionals that require advanced schooling.  In my current example, my buyer just finished up his PhD program and will be relocating from the midwest to the east coast to start his new job.  With the logistics of moving his family being a little bit crazy, the route that's most convenient for them is to own their new home prior to making the move (and therefore, prior to him starting his new job).

     While many lenders require a paystub prior to closing, this is often a lender overlay and not an industry-wide guideline.  There's even more than one option for buyers to qualify with just a job offer letter.  FHA and conventional allow for it under many circumstances, and I'm sure there are some private lenders that will consider it as well.

 

What are the guidelines?

 

     I can't speak for every lender, but for those that allow a job letter to suffice for income qualification, a buyer will have to start their job & be able to provide a paystub prior to the first payment being due on their new loan (FHA requires income verification within 60 days of closing to be eligible for HUD endoresement) .  Also, there cannot be any contingencies on either a job offer letter or a written acceptance.  For example, someone who just graduated law school can NOT use a job offer if the job offer is contingent upon them passing a bar exam.  Under current documentation standards (as of 5/5/17), most investors will accept a fully completed (by the employer) verification of employment in lieu of a paystub.

     A lender must also confirm the borrower will have adequate reserves to cover mortgage payments & other housing expenses prior to receiving regular paychecks. 

 

Why do some lenders not allow a job letter?

 

     In a word: Risk.  FHA loans require a paystub or evidence of pay prior to issuing a HUD endorsement (receiving HUD endorsement is different than simply funding the loan).  Conventional loans require a paystub or adequate proof of income prior to delivering the loan to Fannie Mae/Freddie Mac.  Again, just because a loan can't immediately be delivered, doesn't mean it can't be closed and funded.  For a lender, though, this signifies a risk because if something were to happen between the time a loan closes and the time a borrower receives a paystub that results in job termination, the lender is on the hook for a loan that can't be taken anywhere.  Many lenders either can't, or won't, take that risk.

     Other lenders do not sell directly to Fannie Mae or Freddie Mac, so their investors may not accept a job letter in place of paystubs. 

 

When is a job offer letter not enough?

 

     As I mentioned above, it's all about risk.  Nearly every guideline indicates that a job offer letter must be non-revocable, so if there's a chance it can be revoked, it's not going to work.  Also, if there are any other potential red flags on the file, chances are a lender isn't going to want to take on the additional risk of waiting for that paystub, too.  Contingencies from either an employer or the buyer on their job acceptance paperwork would also throw a wrench into things.

 

Things to consider

 

     A job offer letter being used for qualifying income is one of many examples where many lenders have many different answers.  Simply because one lender cannot do something, there is still hope.  Working with an experienced mortgage professional, you can get guidance on what is and what is not doable. 

     If you're planning on using a job offer letter to qualify and close before starting at a new employer, it's best to have all other areas of your loan package in good shape - credit, assets, no large gaps in employment (unless for school), etc.  Closing a loan with a job offer letter can be risky business for a lender, so it's best to not have any other potential red flags in your loan file.

 

 

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Rainmaker
142,236
Diana White-Pettis
Bennett Realty Solutions - Upper Marlboro, MD
GRI, CDPE, CNE, WHC Upper Marlboro Homes for Sale

Although a job offer letter is suffice for some lenders; I would imagine that it's very risky for most of them.  I think it's essential to make sure all other areas to the loan package are flawless.

May 25, 2014 01:43 PM #1
Rainmaker
4,431,023
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

I was looking for an apartment for a doctor recently and they said the job letter would be enough because he had not yet started working  at the hospital 

May 25, 2014 09:20 PM #2
Rainer
215,419
Marshall Enterprises
Marshall Enterprises - Saint Michael, MN
Antiques, Lawn Care, and Trashouts

This is just terrific information!  I had no idea that that could be done.  Excellent information and suggested.

May 26, 2014 03:16 AM #3
Rainmaker
2,745,583
Kathleen Daniels
KD Realty - 408.972.1822 - San Jose, CA
San Jose Homes for Sale-Probate & Trust Specialist

John, This is good to know.  I've not encountered working with a buyer who is not employed but has a job offer letter.  This is why it is so important that we work with experienced and knowledgeable mortgage professionals, like YOU!

May 26, 2014 03:56 AM #4
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John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

Diana - it can be risky, and compensating factors to make the loan package look better are great to have, but just going off of guidelines a job letter is enough to fund a loan

Gita - that's great the doctor was able to get help, that profession is one where we see this situation most often as they finish residencies or finish up med school and want to buy a place instead of rent.

ME - thank you, glad that you found the information beneficial

Kathleen - thank you so much!  It was a little sad to hear the Realtor tell me a previous deal had fallen apart because the lender couldn't accomodate them.  It is always important to go beyond a 'no' and seek second opinions.

May 26, 2014 08:33 AM #5
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Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

John Meussner 

This is really great information to be aware of. Finding the right lender who WILL do the loan under these circumstances is critical Glad we talked about this the other day!

Jeff

Jun 09, 2015 02:34 AM #6
Anonymous
rvk

thank you john.

I just finished a job and about to close a home with a job offer that has a start date about a month from the closing date. Am I allowed to provide a different paystub post closing if I take a job that's different to the offer letter I originally submitted to the mortgage lender?

Apr 17, 2016 03:40 PM #7
Anonymous
rvk

Thank you, John! Very helpful.

Apr 18, 2016 07:46 AM #8
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