What a Layoff Means for Your Mortgage
No one plans to lose their job, but it can happen to anyone. The uncertainty of COVID-19 has given many employees reason to question their job stability during the past year. Regardless of the reason, a layoff can be particularly harmful when it occurs during the hunt for a new home or when your mortgage payment depends on your paycheck.
While it might be a cause for pause, it doesn’t have to derail your dreams for the long term. The key is understanding how the loss of a job impacts your mortgage application. Learn how to get your mortgage application back on track after being laid off and what you can do to protect your current home if you unexpectedly lose all or part of your income.
Don’t Try to Hide It
The first and most important step after a layoff or furlough is to communicate with your lender. Most will verify employment more than once during the process, so it’s unlikely to go unnoticed. Submitting your application and signing your closing documents also include your confirmation that the information is true and accurate. Failing to inform them of a substantial change could also expose you to legal liability.
Obtaining a mortgage and making the required payments is in the best interest of lenders and financial institutions. That’s why they are likely to work with you when unexpected challenges arise. Many offer deferral or other hardship options for existing borrowers. The best route for minimizing the consequences of job loss is to be forthright and transparent.
If you’re heading toward closing on a new home, the effect on your application will depend on your situation. A co-borrower with enough income to still qualify may mean you can move forward. Otherwise, your search may need to be put on hold. Finding a similar position will probably be the quickest way to get back on track. But lenders often want to see you remain in the job for several months, or longer if you change industries, before considering you again.
As soon as you learn that your job is in jeopardy, reach out to your real estate agent and mortgage contact to let them know it might be time to halt your efforts and ask for advice on recovering quickly.