Mortgage, unemployment; Losing your employment in the middle of the mortgage application process can be incredibly stressful. Because this is typically an unlikely scenario, most people don’t know what steps should be taken when this happens.
Below, we’ll discuss what you should do if you lose your job in the application process, and how it may play out depending on your specific situation.
Situation #1: Your unemployment is temporary
No matter what your circumstance is, the first thing you should do is let your lender know. More than anything, lenders want to make sure your future income is reliable. You should be ok in this circumstance, as long as you provide your lender with a letter from your employer stating your temporary unemployment. If your income is reduced while on furlough, your lender will want to make sure you can still pay with the adjusted decrease. If you don’t still don’t qualify with the reduced rate, you’ll most likely need to pause the process until your income rebounds. In most cases, unemployment income isn’t eligible for mortgage qualification, so move cautiously through this step and update your lender regularly.
Situation #2: You’re self-employed
If you’re self-employed, the most important thing for a lender is verifying that your business has been open and is publicly operating. If you can’t prove this or your business was closed even temporarily, lenders will mostly likely not use your previous reported income as qualification.
Situation #3: Your job is commission based and/or you’re working less hours
The unfortunate thing about commission based jobs is that income isn’t always stable. This is something lenders want to keep a close eye on, as a large part of the mortgage approval process is making sure you have a steady, consistent income. The best thing you can do in this situation is to show your lender how this may level out in the future. So for example, you might be in an industry that is very seasonal, so stronger months will counteract the slower months.
Situation #4: One person isn’t working when filing a joint application
If one of the two filling out a joint application is unemployed, you might have to view your house hunting a bit differently. Unless you can still qualify with the single income, you’ll need to get out of your purchase agreement and find another home that is better suited for your budget.
In all, speaking regularly with a lender is the best way to navigate your specific situation, and make sure you’re in a solid financial situation to move forward with the application process.
If you’re looking for an expert in the mortgage space, Ken Venick is your guy! He has over 30 years of experience in the mortgage loan business and can put you or your client in the right mortgage loan product for their unique needs. Contact us today!