If you lose your job before closing on a mortgage, there’s a real risk your loan could be denied. Lenders need proof that you can make your payments, and without a verifiable income source, that’s tough to do.
But don’t worry—losing your job doesn’t have to mean losing your new home. Here are some strategies to navigate this challenging situation and still make it to closing day.
Communicate with Your Loan Officer
Transparency is key. While you might be tempted to keep your job loss under wraps, it’s not worth the risk. Lenders often call your employer on the day of closing for final verification. Plus, failing to disclose a job loss could be considered mortgage fraud, especially if you’ve signed documents stating you’ll be honest about your employment status.
Instead, be upfront with your loan officer. They want the deal to go through as much as you do—they don’t get paid unless the loan closes. Your loan officer might have solutions or alternative options that you haven’t considered.
Reach out for personalized advice and support.Secure a New Job Quickly
Landing a new job quickly can salvage your mortgage application. If you can get a job offer letter that details your new salary, start date, and confirms a full-time, permanent position, you might be able to re-qualify for the loan.
However, your lender may require you to have received your first paycheck before closing, which could delay the process by a few weeks. The sooner your start date, the better your chances of keeping the deal on track.
Request an Extension from the Seller
If you can’t close on time, the seller has the right to keep your earnest money. But don’t lose hope—most sellers are willing to work with you rather than start over.
Request a 30-day extension and offer to cover the seller’s additional costs, such as their loan interest, taxes, and insurance. Many sellers are flexible, especially if it means they don’t have to find a new buyer.
Rely on Your Spouse’s or a Co-signer’s Income
If your spouse’s income alone qualifies you for the mortgage, you might still be able to proceed with the loan in their name. Alternatively, bringing in a co-signer could also boost your chances.
Keep in mind that co-signing is a significant commitment that can strain relationships if payments aren’t made on time. Additionally, if you want to remove the co-signer later, you’ll need to refinance the loan.
Before proceeding, consider if buying a home now is the right choice. Without a steady income or severance, finding a new job can take weeks or months. Ask yourself if you’re ready for the added stress of a new home.
Reach out for personalized advice and support.Explore Short-term Financing Options
There are more loan options beyond conventional, FHA, USDA, and VA loans. For temporary financing, consider an owner-occupied hard money loan. These loans provide a 6-12 month window to find a new job, build income history, and then refinance into a traditional mortgage.
Another option is a seller carryback, where the seller finances the purchase. This arrangement can offer quick closing without bank involvement, though it typically comes with a higher interest rate.
Consider Backing Out of the Transaction
Sometimes, the best decision is to back out of the transaction. Losing your earnest money, typically around $5,000, might be a better option than committing to a mortgage you can’t afford. Once you’re back on your feet with a new job, you can resume your home-buying journey with more stability.
Need Help? My Perfect Mortgage is Here for You
Navigating job loss during the home-buying process is tough, but you don’t have to go through it alone. We’re here to assist you through this challenging time and help you find the best path forward.
Reach out for personalized advice and support.
