You have accepted a new job offer and would like to purchase a home, the catch, you still have to fulfill the contingencies of the offer; such as background check, drug testing – all the normal employment criteria. The question is, when I can start looking for a home based on this particular situation. Fannie Mae and Freddie Mac have recently made some allowances for borrowers under contract to start employment at a future date, however for the sake of this conversation I’m going to specifically discuss a physician or dentist buying a home.
For the lenders that offer a physician loan program they are likely looking for your executed contract, which will follow your offer letter. The offer letter may suffice to get your lender started; however the contract may be needed. I would recommend planning that this is what you will need prior to a closing. Within your contract the lender will be looking for compensation details, term of the contract, and start date – the entire contract is reviewed.
Although all lenders programs vary, what I typically see is the ability to close on a loan when you are within 90 days of your employment contract start date. This is a wonderful benefit, as it allows you to find a home, close on a loan, and be in the new home simultaneously with beginning your new job. This is especially nice when you are relocating. Some lenders will require “reserves” when you close under this program and if you haven’t started your new job right away. Reserves are funds that you would be required to show that you have available in savings or accessible investment or retirement funds; they are not funds that you have to withdraw or bring to closing. The amount of reserves needed, if applicable, will vary from lender to lender and it is a specific number of months based on your new house payment, which includes principal, interest, property taxes, homeowner’s insurance and any applicable HOA’s. It may be 3 months or I’ve heard of some lender’s collecting as much as 6 months. As an example; if your total house payment is $2500 and 3 months of reserves is needed you will need to show that you have $7500 available in savings – this is an addition to the funds you will need to close on the loan. There are some lenders that don’t require reserves, but it’s a good question to ask. Again, this is typically driven by how soon you close on a loan before you begin employment.
One last recommendation is that I would let your employer know that you purchasing a home and that you may need the executed employment contract prior to a closing. Your lender will let you know if the offer letter will work or any other form of paperwork, however if the contract is needed you will need to let your employer know that so that they can assist in getting it taken care of. They are familiar with this and in most cases want to help in any way that they can.
New job, new home – doesn’t everything come in three’s?