Understanding Home Loans with 3 Months Employment in Australia

More than one million Australians changed jobs in the year to February 2023, according to Australian Bureau of Statistics data. And no wonder. 

Research by the e61 Institute found those changing employers realised a greater pay bump than those who stayed at their original posting. New jobs can also bring about increased career satisfaction and advancement.

However, many people looking for a home loan assume lenders prefer borrowers who have been employed for a decent period. That might be because a longer stint in a job is assumed to signify a reliable, stable source of income. 

But that’s not always the case, particularly in the modern age. 

How will a new job impact your ability to get a mortgage?

“These misconceptions have been built through older policies, wherein many lenders wanted to see you in the job for three months or six months before you could use that payslip to get a loan,” Icon Mortgages managing director Jasjeet Makkar told Your Mortgage.

“But, especially over the last 12 months, I've seen [that change with] a lot of banks.

“People are changing jobs more often and, especially with the bigger lenders, there are no minimum job tenure requirements.”

Still, and especially with job hopping becoming an established trend, it’s crucial to understand how your career decisions might affect your ability to qualify for a mortgage.

There’s one main reason a person with a new job could assume they might have greater difficulty in securing a mortgage: their probationary period.

Most employees who have been with a company for less than a set period of time (often three or six months) have conditions on their employment. They might need to meet certain criteria to secure their job at the end of their probationary period or they could be laid off without the same warning offered to longer-term employees. 

While there mightn’t be any tenure obligations borrowers must meet, they likely do need to evidence security, Mr Makkar said. 

So, if your new role is the same as your last, just at a new company, you might not have any issue securing a loan.

There is also a possibility that a lender will see ‘job hopping’ – typically considered to be switching employers every few months – as a red flag, signalling unstable income. 

“You need to prove – not just to the bank but to yourself as well – that you have job security if you're going to take on a debt,” Mr Makkar said. 

"You're just about to jump into a big commitment, and you need to make sure you can fulfil it.”

Can you get a home loan if you’ve been in a job for less than 3 months?

Plenty of lenders understand that, particularly in the post-pandemic world, workers are often in high demand, and many highly skilled career opportunists have actively changed jobs for better compensation or working conditions. 

When assessing your eligibility for a home loan, lenders will take the following into consideration:

• How long have you been in your new job?
• How often do you change jobs?
• How long have you been in your current field or industry?
• Have you stayed in the same industry or moved to a new industry?
• How often do borrowers in your industry default on their repayments?
• Do you work full-time, part-time, or casually? 

A lender will want to cover its bases, as it could be left out of pocket if a borrower were to default on their home loan. The answers you provide to the above questions could help it assess how large of a risk you represent.

If you work in an in-demand field, have successfully held your same role with previous employers, or receive a notably high salary, you might represent a lower risk despite having a new job. 

Some borrowers might also have other sources of income, a portfolio of valuable assets, manageable liabilities and expenses, a healthy credit score, mountains of genuine savings, and many years of experience in an in-demand field. A lender may grant such a person a home loan as they appear to represent less risk.

But not all wishful home loan holders are in such a privileged position. 

If your work is somewhat insecure and you don’t have other glittery factors to add to your home loan application, you might have to jump through additional hoops in order to secure a home loan. You might even decide to wait until you’ve been in your role for longer before applying for a mortgage. 

Which lenders offer home loans to borrowers in new jobs? 

You might be surprised by the breadth of lenders willing to consider borrowers – and their employment situations – on a case-by-case basis. 

Though, it’s difficult to say which lenders in particular may be willing to provide home loans to those who have been in a job for less than three months, or even less than 12 months.

A would-be borrower might be wise to do their research and reach out to their desired lender for advice on their personal situation. 

And remember, applying to multiple home loan providers in quick succession can leave a mark on a person’s credit score.

Mr Makkar also recommends reaching out to a mortgage broker for advice and support. They’re professionals who spend their careers finding home loans that fit individual borrowers’ needs.

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Do lenders favour certain lines of work?

Interestingly, lenders don’t value all careers equally – they might consider Job A better than Job B, even if Job B typically pays more.

Why is that? It comes back to risk. 

Most lenders want to reduce the risk they take on, and if you work in a field in which you’ll rarely struggle to find a new job, you might represent a lower risk than another borrower employed in a field that’s hard to find work in.

Major banks and other lenders might give preferential treatment to borrowers working in the following roles, for example:

• Nurses
• Teachers
• Medical professionals
• High income roles (lawyers, accountants, and the likes)
• Another line of work in high demand

“There's no blanket answer [as to which career lines are most attractive to lenders],” Mr Makkar said.

“But the internal team of each [lender] may consider certain employment or certain qualifications as a plus point.”

Some big four banks (like Westpac) even waive lenders mortgage insurance (LMI) for those working in certain fields who are borrowing more than 80% of a property’s value, probably because they view such borrowers as low risk. 

Others waive LMI for those in high-paying roles, like doctors or dentists, again due to the perception such borrowers are low risk.

“A lot of people don't know about this because there's only a few lenders in the market that do it,” Mr Makkar said.

How to increase your chances of being approved for a home loan

Applying for a mortgage while in the midst of an unusual employment situation, like a new job, is not ideal. But it's not necessarily a deal breaker.

Here are some things you can do to improve your chances of receiving home loan approval.

Check your credit score

You might want to request a copy of your credit file in order to better assess your financial situation. 

By understanding your own credit score and history, you might be able to better understand how a lender will consider you as a borrower. 

If your credit score is low and you’ve just started a new job, you might decide to wait awhile before applying for a home loan. On the other hand, if you have excellent credit, you might decide to apply for a home loan despite being new to your role. 

Pay back existing debt 

It’s understandable for a wishful homeowner to focus all their financial energy on building a deposit. But that might be all for nought if other debts were to stand between them and a home loan.

If you have several consumer debt products, like personal loan and credit card debt, you may want to consolidate and/or repay those before applying for a mortgage. 

Debt consolidation can be a convoluted but worthwhile venture, and those struggling to meet multiple repayments might want to consider taking the step to combine their debts into one. They might even find they end up spending less on interest by doing so. 

Speak with a broker

Turning to a mortgage broker for help might also be a smart move for would-be borrowers new to their current employment. 

Mortgage brokers have expert knowledge of the mortgage industry, so they can guide you in finding a specialist lender that may be more likely to approve your application.

Be precise with your employment details

Make sure you provide a lender with all required documentation and any supporting information that spells out the state of your employment and income.

An abundance of detail on your job and career history might help a lender assess your earnings and job security accurately. It could also help to put you in better stead. 

For instance, if your recent payslips don’t correctly reflect your gross income – perhaps they miss your ordinary penalty rates or bonuses – your group certificate or bank statements could offer a more accurate and positive picture of your earnings.

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