You are midway through the process of closing on a new home or a refinance mortgage. Then you lose your job. In today’s coronavirus crisis climate, plenty of home buyers and homeowners have faced this situation. Can the home loan go through or is it curtains for your new mortgage? While becoming unemployed during the loan underwriting process is much less-than-ideal, there may be some rays of hope.
Temporary or Permanent Job Loss
Sometimes income loss is due to furloughs. If you have a commitment from your employer as to when you will return to work or your income will resume, you may still be able to continue with your loan application. Be sure to let your lender know right away and provide them with a written letter from your employer with the applicable dates. You will probably have to be able to qualify for the mortgage payments on your reduced income.
If your job has truly been terminated, the mortgage process will likely have to be put on hold until you find new employment. Lenders are looking for sources of stable income and their risk of loss is too great unless you have a reliable job. Taking on a new loan burden may not be in your best interest either; it may just add extra financial pressure to your situation.
Joint Application
If you are applying for a mortgage with a spouse or partner, you may be able to finish the process if you still qualify for the loan payments with his or her income alone. If not, you could reduce your price point for buying a home to account for that single income. Again, the best plan may be to back out of your purchase agreement until you find new employment.
Loss of Commission or Reduced Hours
If your income is dependent on commissions but sales have tanked recently due to coronavirus shutdowns or other economic downturns, you may be able to get a lender to average out your income over a year if it looks like conditions will improve soon. Or with other jobs, it may be that your hours have gotten reduced or you have to take a pay cut due to a lack of business demand. In these cases, unless you can prove that this is part of a seasonal cycle, your mortgage loan may have to be declined.
And don’t count on slipping under the radar with your home loan if you have lost a job. Lenders will verify your employment at the beginning of the loan process and then again just a few days before the loan closing. If something changes with your job or income, talk to your lender right away. There may be more options if you lay out the situation immediately. While it is generally difficult for a mortgage loan to continue after a job loss, there may be some exceptions.
Call and talk to one of our mortgage professionals today and we can help you figure out if you still qualify.