Offer letter mortgage: How to get a loan with a job offer

Can I get a mortgage with a job offer?

Mortgage lenders usually check pay stubs from your current job to see whether you can afford a new home loan. But what if you’re between jobs or just starting out in your career?

An offer letter mortgage may be the answer. This type of loan uses your new job offer as proof of income. Eligible buyers can get approved on an offer letter alone without having the two-year job history required for most home loans.

In this article (Skip to…)

• Offer letter mortgages
• Who can get one?
• Offer letter requirements
• Borrower requirements
• Loan options
• Examples
• FAQ

What is an offer letter mortgage?

An offer letter mortgage is just like any other home loan. But instead of checking your current employment to measure income, underwriters rely on your past income or education and potential for future earnings. Those future earnings are reflected in your new employment contract.

An offer letter mortgage can be a great solution for recent grads who have a high earning potential but no work history, such as new doctors and lawyers. They can also help professionals who are moving upward in their careers.

A job offer gives your lender an alternative way to measure income. But your employment offer won’t affect other aspects of loan underwriting.

You still need to meet the lender and loan program’s requirements for minimum credit score, down payment amount, and monthly debt ratio. These factors affect your eligibility, interest rate, and maximum loan size.

Can I get an offer letter mortgage?

Not just any job offer will satisfy your lender’s employment and income requirements. To qualify based on an offer letter, you typically need to be in a position with good job security and reliable earning potential.

Good candidates for an offer letter loan include: 

• Recent graduates: If you recently finished college or graduate school, and you’ve been offered a position in your new field, a job offer could support your loan application
• People staying in the same profession: When you have a new position within the same profession you’ve worked in for at least two years, you’re likely to succeed in the new job, so a job offer could help you qualify
• Applicants staying in the same company: When your employer re-assigns you to a new job in a new location, your offer letter can show you’re still employed — even if you haven’t officially started the new job yet
• Recently promoted applicants: If you have just earned a raise, an offer letter can bump up your qualifying income which could increase your maximum loan size

In short, lenders need to see that you’ll earn a steady and reliable income in your new position.

Requirements for the job offer letter

To satisfy your loan officer and keep the application process on track, make sure your offer letter:

• Is signed: This type of loan may be called an ‘offer letter loan,’ but most lenders want to see more than a job offer. They’ll need an employment contract signed by you and your employer
• Includes a start date: Your letter must include the day you’re scheduled to start the new job. The start date must be within 90 days of your loan closing date. You may have more loan options when starting your new job within 60 days of your loan closing
• Includes a salary: Lenders are especially interested in your base pay, which is your pay before optional bonuses, overtime, or commissions
• Isn’t a contingent offer: Your new job can’t depend on anything, such as a clean drug test or meeting a sales quota

Make sure your new employer sends a job offer letter that meets these requirements. Lenders will reject a vague or open-ended offer letter. And your lender may have its own specific requirements, so ask your loan officer for details.

Qualifying for an offer letter mortgage

To many lenders, even the most promising new job may need more support.

For example, underwriters have to make sure you’re capable of making monthly mortgage payments during the time between loan closing and your first paycheck. So your lender may also ask for:

• Bank statements: You typically need enough in savings to make your house payments before the new job starts, and an extra three months’ worth of reserves in case the position doesn’t pan out after all
• Primary residence certification: Loans for single-family primary residences are less risky for lenders. An offer letter loan won’t work for a vacation home or investment property but it will work for a single-family home, townhouse, or condominium unit — as long as it will be your primary residence
• Employment history: Even though you’re qualifying with a new job, previous work history may still be important to your lender, especially if you have a new job within your existing profession. If you’re a first-time home buyer who’s never worked (such as a recent college grad), tell your loan officer

A signed job offer can provide proof of income, but your mortgage application will also depend on your credit score, debt load, and down payment size.

What loan types allow job offer letter mortgages?

Most major loan types will accept a signed job offer as proof of income, as long as the job and offer letter meet requirements outlined above.

Conventional loans with a job offer letter

Most homeowners get conventional loans which are regulated by Fannie Mae and Freddie Mac. Both Freddie and Fannie will allow lenders to consider a signed job offer letter as proof of income.

You will need three to six months of cash reserves in the bank to get approved. You’ll also need to meet other loan requirements. For most lenders this means a credit score of at least 620 and a down payment of at least 3 percent. Although lenders may set higher standards for offer letter mortgages.

Freddie Mac can also allow a cash-out refinance with loan approval based partly on a job offer.

Government-backed home loans with a job offer

Government-insured loans from the FHA, USDA, and VA will also allow offer letter mortgages.

• FHA and USDA loans: Offer letter mortgage applicants must have enough cash in savings to pay six monthly mortgage payments on the home. You can skip this requirement if you start your job and can show a pay stub before closing
• VA loans: The VA doesn’t require borrowers to have as much cash on hand — only one month’s mortgage payment for every 30 days before your job starts. If your job starts in 60 days, you’d need two months worth of payments in savings. But the VA won’t consider a job offer unless you’ve already worked in the same field for at least a year

Most private lenders offer FHA and VA loans. USDA-guaranteed loans are pretty easy to find, too.

More about FHA, VA, and USDA loans

FHA loans can extend competitive mortgage rates to buyers with lower credit scores and higher debt loads. Typical FHA lenders require a credit score of 580 and a minimum down payment of 3.5 percent.

USDA and VA loans won’t work for everyone. USDA loans help moderate-income buyers in rural and some suburban areas. VA loans are a benefit for military members, veterans, and surviving spouses.

VA and USDA loans require no money down. USDA lenders look for credit scores of 640 and higher. Many VA lenders require credit scores of 620 but some go as low as 580.

Offer letter mortgage examples

Here’s a real-life example of how the offer letter income program might work.

Assume a recent business school graduate takes a new job that starts two months from today. It could be in town or across the country.

So long as the graduate plans to move into the home, the home is not a multi-unit building, and there’s enough money in the bank to cover three months of total housing payments, they can use the income from their offer letter on a mortgage application.

The program can work for people expecting a raise, too.

If their new salary starts within 90 days of closing, and is supported in writing by the employer, the new income is usable for purposes of a mortgage.

Note that in all cases, a mortgage applicant’s loan size is limited to the local conforming loan limit. In most areas, the single-family loan limit is $[current-loan_limits]. In high-cost areas such as New York City and San Francisco, that amount is capped at $.

An offer letter mortgage does not typically require proof of graduation. The signed job letter is proof enough.

Offer letter mortgage FAQ

Check your eligibility for an offer letter mortgage

If you’re a recent graduate or someone starting a new job in the same field, you might not have the standard two-year work history required for a mortgage. But lenders can often use an offer letter to verify your income and help approve you for a home loan.

Connect with lenders or a mortgage broker to check your eligibility and compare loan offers.