For many, being hired by an airline is a dream come true. With a new airline job comes the decision of where to live. If you plan to move into domicile or you’re exiting the military, buying a new home is usually high on the priority list. The trick is qualifying for a mortgage on first-year pay. Let’s face it, first-year pay is not exactly your dream pay. Even trickier, is how to buy on first-year pay beforeyou start training. Let’s discuss how to make it work.
Typically, switching jobs is not a good idea when applying for a mortgage because your lender wants to see stable income. At a minimum, you need an unconditional job offer with your start date and expected income. Most of the time when we are hired, we only receive a conditional job offer until our background, drug, and PRIA checks are complete. This is where you need to be proactive with your new employer to get the screening done quickly and request an unconditional job offer. Some HR departments are better than others, so use all your available resources. I’ve helped new hires be screened earlier by helping them get in touch with the right person versus them emailing a generic hiring email address. Use any insider connections you have. Once you get the right person, they are typically helpful because they understand all the stresses that come with a new job and buying a home. Once you have all the requirements complete, you’ll need them to provide an unconditional job offer letter that documents your expected first year pay (based on the minimum guarantee from your contract) as well as your training start date. (You are welcome to contact me if you need an example or more details.)
To qualify, your lender will be using your expected income from the unconditional job offer letter so make sure the numbers are correct. I recommend you use a lender who understands pilot pay and our contracts because explaining this to an underwriter who doesn’t often deal with these issues can be frustrating if not disastrous for you.
Debt-to-income (DTI) ratio is one of the most important points the lender will use to qualify you with first-year pay. The guidelines vary depending on the loan program you are using to finance your new property, however 41% is an ideal debt-to-income ratio. To make these calculations simple, take your first-year pay, or expected income, and multiply it by .41 to get your maximum monthly debt allowed. Then add all of your current monthly debt payments to calculate your current monthly debt obligations. The difference between your maximum allowable and your current debt payments is the maximum mortgage payment for which you can expect to qualify. Obviously, the best way to figure this out is to contact a licensed mortgage loan originator, but this is a good starting point. All lenders will use an Automated Underwriting System (AUS) that will provide the ultimate deciding factor as to what your maximum debt-to-income ratio will be. So please, reach out to me or a licensed originator if you are over the 41% ratio. Just because you are over the ideal ratio does not mean you will not qualify. It is a case-by-case decision based on the AUS findings.
As I always stress, the only real way to ensure you’ll qualify and for how much is to contact a licensed loan originator. This is but a short list of some important things to consider. The earlier you start the process the fewer surprises you’ll have once it’s game-time, so don’t be afraid to connect with a lender sooner than later. Typically, the smoothest loans I see are when a borrower reaches out about six months prior to purchasing. This provides plenty of time to fix any potential issues and sets you up for success.
I’m always happy to help a fellow pilot navigate the mortgage process. I welcome you to contact me with any questions at email@example.com on my cell phone, 850-377-1114. Also, please review my previous articles available in the Oct ’18 through Feb ’19 issues of Aero Crew News.