The ability to use a letter of intent to hire when qualifying for a mortgage depends on an individual lender's risk tolerance. Not all lenders, nor the investors that back mortgages, accept a letter of intent, or an employment offer or contract, in lieu of income. If you're a recent medical, business or law school graduate, relocating for a new job -- or even getting a pay raise with your current employer -- and a letter of intent suffices as proof of income, the letter must provide the lender with key details. Show that employment is guaranteed, your home fits certain criteria and you have sufficient reserves to cover the mortgage until you start getting paid.
Obtain a non-contingent offer letter signed by the new employer. An employer can place contingencies, or conditions, on your job offer, such as a background check or references review. As a result, they can rescind the job offer if you fail to meet their conditions. A non-contingent employment letter or contract signed by both you and the employer shows a mortgage lender that you are hired and that it's just a matter of time before you start your new position and begin receiving the income used to qualify you.
Specify the salary, position and start date for your new job in the non-contingent employment offer or contract. The employer generating the letter must include your agreed-upon gross income and the date on which you will officially begin getting paid. Your start date may not exceed a certain time frame after the proposed closing of your new mortgage, such as 60 or 90 days.
Provide the lender with proof of income within the required time frame after closing on your home. For example, a lender that sells its loans to Fannie Mae requires borrowers to obtain 30 days worth of pay stubs before the lender can sell the loan to Fannie. That's why it behooves the lender to obtain proof of employment and income by way of a solid, non-contingent offer before closing. If you don't begin working within the allotted time frame, or fail to earn the amount in your employment contract, the lender can't sell the loan to its investor.
Letters of intent for employment may only be used on primary residences, not investment, vacation or second homes.
The home must be a single-family detached residence, a condominium or townhouse.
You must prove to your lender that you have sufficient cash on hand, along with the employment contract. For example, if you are scheduled to begin work within 60 days of closing, you need at least two months of principal, interest, property taxes and homeowners insurance to cover your housing costs until you begin to receive income. The lender may also ask for additional reserves, such as three or six months worth of PITI.
Should you fail to follow the terms of your employment agreement, the lender may investigate the authenticity of your employment letter through a post-closing quality control audit. Discrepancies or misrepresentations by you or the employer may result in the lender making your loan due and payable immediately or taking legal action.
- Fannie Mae: Employment Offers or Contracts
- BestMortgageRates.com: Offer Letter Mortgage -- Getting a Loan Based on Future Income
- The Mortgage Reports: “Offer Letter” Mortgages: Get a Loan Before You Start Your First Day of Work
- Lending Tree: Home Loan Q & A -- Getting a Mortgage With a New Job
- Stanley Reid and Company: Dealing With a Contingent Offer
- Kenishirotie/iStock/Getty Images