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What Happens If I Lose My Job During the Mortgage Process?

What Happens If I Lose My Job During the Mortgage Process?

July 29th, 2020 | Interest Rates

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.

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Lonestar Mortgage of Texas

20501 Katy Freeway, Suite 100G
Katy, Texas 77450
Phone: 281-492-9158
Fax: 281-946-5108
NMLS: 311730
We lend in the following states: Texas
Broker, NMLS #311730

Figure: 7 TAC §80.200(b) "CONSUMERS WISHING TO FILE A COMPLAINT AGAINST A COMPANY OR A RESIDENTIAL MORTGAGE LOAN ORIGINATOR SHOULD COMPLETE AND SEND A COMPLAINT FORM TO THE TEXAS DEPARTMENT OF SAVINGS AND MORTGAGE LENDING, 2601 NORTH LAMAR, SUITE 201, AUSTIN, TEXAS 78705. COMPLAINT FORMS AND INSTRUCTIONS MAY BE OBTAINED FROM THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV. A TOLL-FREE CONSUMER HOTLINE IS AVAILABLE AT 1-877-276-5550.

THE DEPARTMENT MAINTAINS A RECOVERY FUND TO MAKE PAYMENTS OF CERTAIN ACTUAL OUT OF POCKET DAMAGES SUSTAINED BY BORROWERS CAUSED BY ACTS OF LICENSED RESIDENTIALMORTGAGE LOAN ORIGINATORS. A WRITTEN APPLICATION FOR REIMBURSEMENT FROM THE RECOVERY FUND MUST BE FILED WITH AND INVESTIGATED BY THE DEPARTMENT PRIOR TO THE PAYMENT OF A CLAIM. FOR MORE INFORMATION ABOUT THE RECOVERY FUND, PLEASE CONSULT THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV."