Buying a Home With a Job Offer Letter in Colorado

Can you buy a home in Colorado before your new job starts? Sometimes, yes. Fannie Mae's guidelines let a lender use the income in your job offer letter, even before your first paycheck, as long as its conditions are met, starting with what the offer shows. On one of Fannie Mae's two paths, there are also limits on when your start date can fall relative to closing.

That can come as a surprise if you're relocating for work. It's easy to assume you need pay stubs from the new job, and plan to rent first. Depending on your loan and your offer, renting first may not be your only option.

What a lender can do with an offer letter

Under Fannie Mae's Selling Guide section on employment offers or contracts, the lender must use the monthly income amount in the offer letter as qualifying income.

In plain terms, the salary in your signed offer can be the income your lender works from. If your loan follows Fannie Mae's guidelines and your offer meets its conditions, you may not have to wait until you've collected a few pay stubs in Colorado.

There are conditions, though, and they're specific. Your lender will need to determine whether your offer and your loan fit them.

What your offer letter needs to show

What matters is what your documents show. Fannie Mae's guide says the documents must identify the employer and the borrower, plus the terms of employment, including position, type and rate of pay, and start date.

Before you send it to your lender, check that your letter clearly states:

The employer's name and your name
Your job title or position
How you're paid and at what rate, such as an annual salary or an hourly rate
Your start date

You also need to show you accepted it. The guide says acceptance can be documented through a signed agreement, a written confirmation such as an email, or other verifiable means.

If anything on that list is missing, ask HR for an updated letter now. It can be easier to fix before you're under contract than during underwriting.

Other loan programs may treat income from a job you haven't started differently, so ask your lender which rules apply to your loan.

Two paths, and why your paycheck matters

Fannie Mae's guide describes two ways a lender can handle this. Either way, the guide calls for a fully executed and non-contingent offer or contract.

Path one: the lender gets a paystub later. Your loan may be able to close on the offer letter, and before the lender delivers the loan to Fannie Mae, it must save your most recent paystub supporting the income it used.

Path two: no paystub before delivery. This path comes with tighter limits:

It's only for a purchase of a one-unit principal residence.
You have to be qualified using only fixed-base income, so income such as bonuses or commissions may not count toward qualifying on this path.
Fannie Mae's guide also sets limits on when your start date can fall relative to the note date, naming thirty days before and ninety days after it. The note date is the date on the loan note you sign, which generally lines up with your closing. Your lender will need to determine how those limits apply to your file.
The lender has to document extra funds in reserve.

Those extra funds can be either six months of the full housing cost for the home you're buying, or enough to cover the monthly debts in your debt-to-income ratio, including that housing cost, from the note date until your start date, plus one more month. The lender may count a partial month as a full one.

So on this path, the gap between your closing and your start date can matter. Talk with your lender and your new employer about timing before you pick a closing date. Sometimes a small shift in either one makes the whole plan work.

Your lender will decide which path fits your file, so ask early what they'll need from you.

A few details that can trip people up

Who you'll work for. Fannie Mae's guide says you must not be employed by a family member or by an interested party to the transaction.
Conditions in the offer. Because the guide calls for a non-contingent offer, ask HR early about anything in your offer that still has to clear, and share what they tell you with your lender. Under path two, the guide says the lender must confirm before closing that all conditions of employment are satisfied.
A call to your new employer. The guide says a verbal verification of employment is required. If your start date is on or after the note date, the lender may instead confirm with the employer that the terms of the offer haven't changed.
Changes after you apply. If your start date, pay or position shifts, tell your lender right away.

Get preapproved with the offer in hand

Once your offer is signed, it's a good time to talk with a lender. Just know what a letter from them does and doesn't mean.

The Consumer Financial Protection Bureau's explainer on prequalification and preapproval letters says lenders use those terms differently, and some will only issue a preapproval based on verified information. It also says these letters tell you about your likelihood of getting a loan but aren't firm loan offers.

For the steps involved, read how to get preapproved for a mortgage in Colorado. If you're also juggling the move itself, our guide to buying a home in Colorado from out of state covers touring, inspections and the property details worth checking early.

Your next step

A new job and a new state is a lot at once, and the offer letter is one piece you can get right early. Look over the Colorado mortgage guide to see how buying here works.

When you're ready to see where you stand, take the homebuyer quiz. You can also reach Diane at 719-687-2112.

Diane also helps buyers in Arizona, Montana and Florida.

Diane Beaumont, Mortgage Loan Originator, NMLS #247026. Benchmark Mortgage, a dba of Ark-La-Tex Financial Services, LLC, NMLS #2143. Equal Housing Lender. Not a commitment to lend.