Since the start of the Covid-19 pandemic, record numbers of Americans have left the workforce for a variety of reasons, which has led many to reevaluate their life choices and consider going back to that low-paying service job.
The percentage of working-age individuals (15–64 years old) in the labor force, known as the labor participation rate, is at its lowest point since the 1970s. In August, 4. 3 million Americans left their jobs—the highest number in 21 years, when the U. S. Bureau of Labor Statistics began tracking this data in 2000.
Though the stories of people who have left jobs run the gamut of reasons, like they were tired of working at restaurants for minimum wage, decided to finally retire, found better paying careers, or wanted to start a new business, what happens if the people who have left jobs want to buy a house in the next few months or years, particularly when housing market prices continue to climb? However, not all resignations are equal in the eyes of mortgage lenders.
It’s an exciting time, so it makes sense that you might want to take some time to settle in and enjoy your new home after closing on your new residence. Congratulations! However, what if you’re considering leaving your position? Is it feasible to do so without risking the security of your recently obtained mortgage?
The short answer is yes, you can quit your job after getting a mortgage. As long as you continue to make your mortgage payments on time, you shouldn’t have any problems. However, there are a few things to keep in mind:
- Your lender may require you to provide proof of income. If you quit your job before closing, your lender will likely require you to provide proof of income from another source, such as a new job offer or savings account.
- Your credit score could be affected. If you quit your job and your income decreases, your credit score could be affected. This could make it more difficult to get approved for other loans in the future.
- You may have difficulty getting approved for a new mortgage. If you quit your job and are unable to find a new one quickly, you may have difficulty getting approved for a new mortgage if you need to move in the future.
Overall, it is possible to quit your job after getting a mortgage. However, it’s important to weigh the risks and benefits before making a decision. It’s advisable to speak with your lender if you have any concerns about how leaving your job will impact your mortgage. They can assist you in weighing your options and selecting the course of action that will work best for you.
Frequently Asked Questions
Q: What if I can’t find a new job right away?
A: If you can’t find a new job right away, you may be able to get a mortgage forbearance. This is a temporary agreement with your lender that allows you to stop making payments for a period of time. However you will still be responsible for the interest that accrues during that time.
Q: What if I have a lot of savings?
A: If you have a lot of savings, you may be able to use them to make your mortgage payments even if you don’t have a job. However, it’s important to make sure that you have enough savings to cover your living expenses as well.
Q: What if I’m self-employed?
A: If you’re self-employed, you’ll need to provide your lender with proof of income from your business. This could include tax returns, bank statements, or profit and loss statements
Additional Resources
- Consumer Financial Protection Bureau
- Federal Housing Administration
- National Association of Realtors
Disclaimer
I am an AI chatbot and cannot provide financial advice. The information provided above is for general knowledge and informational purposes only, and does not constitute professional financial advice. It is essential to consult with a qualified financial advisor for any specific questions or decisions.
How Lenders View Gaps In Employment
Although most lenders prefer to see a minimum of two years of continuously employed history, it is acceptable to switch jobs as long as there isn’t a significant gap between the previous and current positions.
But how long is too long? The short answer is that the longest you can go without between jobs is 30 days, after which lenders will start to take notice. More than 30 days and lenders will probably want a good reason why before they approve you.
“Gaps can be addressed with a letter of explanation,” says Shant Banosian, a loan officer at Guaranteed Rate. “We may require the borrower to be on the current job for a minimum of six months if there is an extended period of unemployment (more than six months).” ”.
Banosian says that requirements might differ depending on the loan product, as well.
Since lenders are trying to determine your ability to repay the mortgage, they’ll also look at your salary. You may receive bonus points if you quit your current position in favor of one with a higher pay grade. However, a job change that results in a lower salary is not always good.
According to InstaMortgage CEO Shashank Shekhar, “A change in position that brings less income or makes your income less predictable could serve as a red flag for your loan officer.”
People Are Walking Away From the Workforce—and the Reasons Are Many
Let’s discuss the so-called great resignation and a change in the reasons why people are quitting their jobs in order to gain a better understanding of how lenders evaluate a mortgage applicant’s income.
The most common reason people left their jobs during the pandemic is age. The labor pool was reduced by about 30 million individuals in 2020 as a result of Boomers retiring at a rate twice as high as they did in 2019.
There are several reasons behind the recent wave of job exits among those who are not yet retired, including wake-up calls brought on by the pandemic.
Dr. Anthony Klotz, a management associate professor at Texas A&M’s May Business School
Other possible reasons include low pay, challenging school schedules, inadequate childcare, and fear of getting and spreading COVID-19. Others left their jobs to start their own business to fulfill a life dream.
According to the Labor Department, 309,000 women over the age of 20 left the workforce in September, even though 194,000 new positions became available.
The vast majority of single female heads of households who stopped working during the pandemic (75%), according to a recent Freddie Mac survey, have not returned. A few of the reasons they didn’t return were that they couldn’t find a job (22%), and that Covid was still a threat (14%).
Freddie Mac Survey of single women: When do you plan to return to the workforce?
| Responses | Percent of respondents |
|---|---|
| Already have | 25% |
| When I can find a job | 22% |
| Not sure | 19% |
| When Covid isn’t a threat | 14% |
| Other | 10% |
| Never | 9% |
| When children go back to school/childcare | 1% |
Running parallel to a drop in workforce participation is a spike in buyer demand for single-family homes.
Low-income workers suffered the most at the beginning of COVID because the hotel and service sectors had to close. Since many middle-class and upper-class workers could work from home, the pandemic had less of an impact on their income.
Some remote workers left large cities in search of greater space (and occasionally lower costs) in suburban and rural areas after realizing they were no longer required to work in an office in a big city. Others might have simply chosen, in the face of a potentially devastating pandemic, that now was the right time to pursue their dream of home ownership.
Simultaneously, as building supplies have become more expensive, there is a decline in the number of single-family homes available for purchase, particularly those that are affordable, and there is fierce competition for the homes that are. These factors, and more, have caused home prices to skyrocket, and supply to become more limited. The number of single-family homes in inventory decreased in September 2013 compared to the same month the previous year, as reported by the National Association of Realtors (NAR).
Here are some ways that your career decisions may affect your future ability to purchase the home of your dreams if you are thinking about quitting or changing jobs.