Starting a new job is an exciting time. But it can also be stressful especially when it comes to your finances. Many expenses pop up when you start working somewhere new, like moving costs new work clothes, transportation, and childcare.
On top of that, you likely won’t get your first paycheck for at least two weeks after beginning a new job. So how can you cover costs during this financial gap?
One option is taking out a personal loan based on your job offer letter But is it really possible to qualify for financing with just an offer letter in hand?
I’ll cover everything you need to know about getting a loan with a job offer letter in this article. Here’s what we’ll discuss:
- What is a job offer letter loan?
- Requirements for approval
- Types of lenders that provide offer letter loans
- Tips to improve your chances
- Alternatives if you don’t qualify
- FAQs
Let’s get started!
What Is a Job Offer Letter Loan?
A job offer letter loan is exactly what it sounds like – a personal loan based on a signed job offer letter rather than your current employment status.
Lenders typically want proof that you’ve been employed at your job for at least one year before approving a personal loan. But for some borrowers, that is not possible, like:
- Recent graduates
- People starting a new job after being unemployed
- Employees who have been at their company less than 12 months
- Professionals switching industries
That’s where a job offer letter loan comes in. It allows you to leverage your future earnings potential to get financing now.
These loans are virtually identical to a standard personal loan. The only difference is what documentation you provide for income verification.
With an offer letter loan, you give the lender a signed copy of your job offer letter rather than pay stubs or tax returns.
Requirements to Get Approved
Lenders have a few requirements you must meet to get approved for a loan based on a job offer letter:
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Signed Job Offer Letter: At a minimum, lenders need you to provide a job offer letter signed by you and the employer. It must include your job title, salary, and start date.
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Start Date Within 90 Days: Your employment must begin within 90 days of when you apply for the loan. Some lenders require you start within 60 days.
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Cash Reserves: Lenders want to see you have enough savings to pay your living expenses prior to receiving your first paycheck. Often you need reserves equal to 2-3 months of your mortgage payment.
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Credit Score: Most lenders require a minimum credit score between 620 and 640. But some may approve applicants with scores in the mid-500s.
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Stable Income: Your career and projected earnings must demonstrate stability. Jobs with commission-only pay usually don’t qualify.
As long as you meet these requirements, your job offer letter can substitute for a pay stub or tax return when applying for a personal loan.
Types of Lenders That Provide Job Offer Loans
You have several options when it comes to getting a personal loan based on a job offer letter:
Online Lenders: Online lending companies like Prosper, Upstart, and LendingClub are great places to look for offer letter loans. They tend to be more flexible than banks.
Banks and Credit Unions: Large national banks and local credit unions may also approve loans with a job offer letter. But they tend to have stricter requirements.
Mortgage Lenders: You can qualify for a mortgage with an offer letter through lenders like loanDepot, Guild Mortgage, and Fairway Independent Mortgage.
Employer Loans: Some companies provide personal loans to new employees as a benefit. Ask your HR department if this is an option.
Cash Advance Apps: Apps like Earnin and Dave allow you to access a portion of your paycheck before payday. But you usually must establish direct deposit first.
I recommend starting your search with online lending companies and marketplace sites like Upstart and LendingTree. They work with multiple lenders to find you the right financing option based on your situation.
6 Tips to Improve Your Chances of Approval
Even if you meet the basic requirements, getting approved for a personal loan with just a job offer letter can be challenging.
Here are six tips to boost your chances of success:
1. Have a Strong Credit Score
Aim for a credit score of at least 680. The higher your score, the better your loan terms will be.
2. Shop With Multiple Lenders
Each lender has its own approval criteria. If one turns you down, keep trying others.
3. Apply for a Smaller Loan
Ask for only what you need. Lenders may approve a $5,000 loan but deny a $15,000 request.
4. Provide Tax Returns
If you have previous work history, tax returns showing your past income can help.
5. Make a Large Down Payment
For a mortgage, a down payment of 20% or more improves your odds.
6. Add a Cosigner
A cosigner with good credit may help you get approved or receive better rates.
Following these tips gives you the best shot at being approved for a personal loan based on your job offer letter.
Can I Get a Loan With Just a Job Offer?
Technically, yes you can qualify for a personal loan with just a job offer letter and no prior employment history. But it can be difficult.
Here are two scenarios where it’s possible:
Recent Graduates
If you just graduated from college, you likely don’t have a work history. But some lenders may approve you based on your education, chosen career path, and offer letter alone.
Just graduated med school or law school? Then you have a good shot. Majored in art history? Your chances are lower.
Returning to the Workforce
If you’re reentering the workforce after being unemployed for a while, limited or lapsed job history may also lead lenders to consider your offer letter.
In these situations, make sure you have a strong credit score, steady career field, and cash reserves. Add a cosigner if possible.
Alternatives if You Don’t Qualify for a Job Offer Loan
If you aren’t approved for a personal loan based on your job offer letter, don’t give up. Here are a few options to consider instead:
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Borrow from Friends or Family: An informal loan on good terms from people you know can tie you over.
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Credit Card Cash Advance: A cash advance from a credit card lets you access funds quickly but watch out for fees.
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401k Loan: If your new job offers a 401k retirement plan, you may be able to borrow against it.
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Credit Union Payday Alternative Loan (PAL): PALs provide small, short-term loans with reasonable rates to members.
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Secured Loan: Offer collateral like your car title to get approved with bad credit or limited income history.
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Paycheck Advance App: Gain access to wages you’ve already earned before payday through apps like Earnin.
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Unemployment Advance: Some states offer loans against future unemployment benefits.
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Peer-to-Peer Borrowing: Websites like LendingClub allow individuals to lend to you.
Don’t take on predatory payday loans or auto title loans with sky-high rates. Exhaust all other options first.
8 Key Questions About Job Offer Letter Loans
If you’re considering a personal loan based on your job offer letter, you probably still have some questions. Here I’ll answer some of the most frequently asked questions about offer letter loans:
1. Can I get approved with bad credit?
Yes, it is possible to qualify with bad credit, usually a score around 600. But you will pay a much higher interest rate.
2. How much can I borrow?
Loan amounts range from $1,000 up to $100,000 depending on the lender. Most approve loans up to $35,000.
3. How fast can I get loan funds?
You could receive funds in your bank account in as little as one business day after approval.
4. What rates and terms are available?
Interest rates range from 5% to 36% APR. Loan repayment terms are usually between 2 and 7 years.
5. Can I use an offer letter from my current employer?
Yes, if you are starting a new position with higher pay at the same company.
6. What lenders offer job letter loans for mortgages?
Many top mortgage lenders approve loans with offer letters, like loanDepot, Guild Mortgage, and Fairway Independent.
7. Do lenders contact the employer?
Most lenders verify your job offer letter directly with your new employer before approving the loan.
8. How long do I need to be at my job after getting the loan?
There is no
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.
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.
Job Offer Letter Home Loan Program
FAQ
Can I use an offer letter to get a loan?
Can I use a job offer letter as proof of income?
Can you get a loan if you just got a job?
Can you get pre approved with a job offer letter?
What is an offer letter loan?
An offer letter loan is any type of mortgage that receives lender approval based on a job offer letter. The lender uses your future income — your estimated earnings in your new position — to calculate your ability to repay and determine the amount you can borrow. Offer letter loans are based on either a fixed-rate or an adjustable rate mortgage.
Do you need a job offer letter?
A signed job offer letter can help borrowers get loan approval while they’re between jobs. These loans can also help borrowers who haven’t started their new job yet. But a borrower who has been in the same job, or in the same profession, for two consecutive years won’t need an offer letter.
Can you get a mortgage loan with a job offer letter?
Every mortgage company has its own lender overlays when it comes to guidelines on a home loan with job offer letter. Mortgage lenders with no overlays, such as myself, can start processing a mortgage loan application with a job offer letter and close without 30-day paycheck stubs.
Do you need a reserve for a home loan with job offer letter?
Reserves will be required with a home loan with job offer letter to make sure borrowers are able to cover their mortgage payments until they start their job. Gustan Cho NMLS 873293 is the National Managing Director of NEXA Mortgage, LLC dba as Gustan Cho Associates NMLS 1657322.