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My wife (29f) and I (30m) are going to be moving across country within the next 4ish months. As part of the move, she wants to quit her job and take a sabbatical for a bit. However, she's reached a point where pressures from work make her want to quit ASAP, but she's scared doing that will jeopardize our ability to get a mortgage. I contend that we make enough from my salary that it won't be a problem to get a mortgage, even if she quits. Here are the finances:

My salary: $115k (will be able to keep this job throughout this process)

Her salary: $150k

We bought our home in 2019 for $430k and are likely going to be able to sell for ~$600k. We have $320k left on the principal.

House prices in the neighborhood we're looking to buy into range from ~400k to 500k and the cost of living will be similar to our current expenses (which is below our means even after maxing retirement contributions).

We don't have and aren't planning on having children, we don't have debts, have great credit (750+), and have a fair amount split up among various retirement/vanguard/savings accounts to feel comfortable with her taking a year or two off working. We aren't concerned about my ability to support us after the move, only the ability to get a good mortgage if she quits.

All the advice we've found online suggests that quitting prior to trying to buy a house is a bad call, but due to our strong financial situation, I don't think it's applicable to us.

So what do you think? Can she quit immediately, or should she hold off until we have the mortgage in hand?

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  • If I understand the numbers right, you will have $280 in equity so you will need to borrow $120 to $220 for the new house with a LTV of under 50%?
    – D Stanley
    Commented Aug 24, 2022 at 14:04
  • @DStanley that seems correct. From what I'm reading an LTV under 80% is "low" and 50% will be low enough to qualify us for near the best interest rates possible, right? So not only can she quit, we'd still be able to get great interest rates
    – Brave
    Commented Aug 24, 2022 at 14:36

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Debt to income ratio is a key metric for loan qualifying and is the main reason quitting a job could interfere with qualifying for a mortgage. Since most loans are sold to Fannie Mae/Freddie Mac most lenders prefer to conform to their standards. Since your credit is good your monthly debts need to be less than 45% of your gross monthly income to qualify for a conventional loan (Fannie Mae Eligibility Matrix).

Debt in this calculation is comprised of payments for rent/mortgage, car/student/personal loans, alimony, child support, etc. The eligibility matrix page linked above has a section on calculating this as well.

Your maximum back-end (after the new mortgage) debts would need to be less than:
115,000/12 = 9,583 * 0.45 = 4,312.50

If you subtract from $4,312.50 your monthly debts you can calculate the maximum new mortgage amount you could qualify for. If you are selling and buying at the same time then they will not factor your current mortgage payment into the back-end ratio calculation.

It is worth talking to lenders to see what you can qualify for on your own. I assume you're pursuing a conventional loan but there are other options available. A lender can run through all relevant figures/options using today's rates for you. They can most likely get the info you need without a credit inquiry.

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  • You seem to mean "expenses" when you say "debts".
    – Acccumulation
    Commented Aug 25, 2022 at 0:47
  • @Acccumulation Plenty of expenses don't get counted in the debt to income ratio though.
    – Hart CO
    Commented Aug 25, 2022 at 18:19

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