What happens if I lose my job before closing on a mortgage? is a question we get asked a lot in our office, and here’s the clear answer you’ve been waiting for.
It can be extremely stressful to lose your job within days of purchasing a home in New Jersey or another state, particularly if you don’t have another source of income.
While finding a new work can help, it doesn’t mean that your lender will approve your home loan while you’re still employed as an employee.
Our experienced real estate attorney in New Jersey has been resolving real estate matters for over 10 years. Curbelo Law with offices in Ridgewood and Newark can become your legal trustable support.
Losing your job before closing on a house can be a stressful and scary experience. But don’t worry, there are steps you can take to protect yourself and your dream of homeownership.
In this guide, we’ll explore the potential consequences of losing your job before closing, the options available to you, and strategies for navigating this challenging situation.
Let’s dive in!
Understanding the Impact of Job Loss on Your Mortgage
Losing your job before closing can impact your mortgage in several ways:
- Delayed Closing: Lenders typically require proof of income to finalize your mortgage. If you lose your job, you may need to provide additional documentation or wait until you find a new job to close on the house.
- Denied Mortgage: In some cases, lenders may deny your mortgage application if you lose your job. This is because they are concerned about your ability to repay the loan.
- Increased Interest Rates: If you lose your job, your credit score may be affected. This could lead to higher interest rates on your mortgage.
Options Available When You Lose Your Job Before Closing
If you lose your job before closing, don’t despair. Here are some options you can consider:
- Talk to Your Lender: The first step is to communicate with your lender as soon as possible. Explain your situation and ask about their options. They may be willing to work with you to find a solution.
- Provide Additional Documentation: Your lender may ask for additional documentation, such as bank statements, tax returns, or a letter from your employer explaining the reason for your job loss.
- Find a New Job: If you can find a new job before closing, this will strengthen your financial position and make it more likely that your lender will approve your mortgage.
- Use Savings or Investments: If you have savings or investments, you may be able to use them to cover your mortgage payments until you find a new job.
- Consider a Short Sale: If you are unable to make your mortgage payments, you may need to consider a short sale. This means selling your house for less than what you owe on the mortgage.
- Seek Professional Help: If you are struggling to cope with the financial and emotional stress of losing your job, don’t hesitate to seek professional help. A financial advisor or therapist can provide guidance and support.
Strategies for Protecting Yourself
Here are some strategies you can use to protect yourself from the financial consequences of losing your job before closing:
- Build an Emergency Fund: Having an emergency fund can help you cover your expenses if you lose your job. Aim to save at least three to six months’ worth of living expenses.
- Maintain a Good Credit Score: A good credit score will make it easier to qualify for a mortgage and get a lower interest rate.
- Choose a Fixed-Rate Mortgage: A fixed-rate mortgage will protect you from rising interest rates.
- Get Mortgage Protection Insurance: Mortgage protection insurance can help cover your mortgage payments if you lose your job or become disabled.
Real-Life Stories and Advice from Reddit
Many people have faced the challenge of losing their job before closing on a house Here are some real-life stories and advice from Reddit:
- “I lost my job two weeks before closing on my house. I was terrified, but I talked to my lender and they were able to work with me. I ended up closing on time and I’m so grateful.”
- “I lost my job a month before closing. I had to sell my house at a loss, but it was better than losing everything.”
- “My husband lost his job a few months before we were supposed to close on our house. We were able to use our savings to cover the mortgage payments until he found a new job.”
Losing your job before closing on a house can be a difficult experience, but it doesn’t have to derail your dream of homeownership By understanding the potential consequences, exploring your options, and taking steps to protect yourself, you can navigate this challenging situation and still achieve your goal of becoming a homeowner.
Remember, communication is key Talk to your lender, be honest about your situation, and work together to find a solution
With careful planning and a positive attitude, you can overcome this obstacle and achieve your dream of homeownership.
2# Explain The Reason Why You Lost Your Job
You must be honest and fully explain why you lost your job. You may still be able to buy your home, but with a possible delay from the lender.
Your lender most likely won’t pay off the mortgage right away if you’re only temporarily furloughed because you can return to work before the closing date. Please note that your lender may cancel the mortgage if:
- Just a few days remain before the closing date and you are still jobless.
- You are permanently fired from your job.
6# Find A Co-Signer For The Loan
One option to continue with your mortgage application is to get a co-signer for the mortgage loan. This option could include a family member in good financial standing. You must, however, be aware of the risks involved in co-signing the loan and have a minimum credit score.
Since their names will be on the mortgage loan, the co-signer will be accountable for the entire amount due.
Please note that the only way to remove the co-signer’s name is through a loan refinance.
What Happens if I Lose My Job While Under Contract to Buy a House
FAQ
What happens if you lose your job while getting a mortgage?
Does lender check employment before closing?
Can I quit my job a week before closing on a house?
Should I tell my realtor I lost my job?
What happens if you lose your job before closing on a house?
Losing your job prior to closing could delay your closing date or, in some cases, lead to a lender denying your application for a mortgage. Here’s what you need to do if you lose your job before closing on a house. What Happens if You Lose Your Job Before Closing on a Mortgage? Can You Change Jobs While Buying a House?
What happens if I Lose my job before closing on a loan?
If you lose your job before closing on the loan, a few different things can happen: Delay in processing your loan: If you’re receiving stable income from another source, or you have a co-borrower whose income is sufficient to meet the lender’s requirements, the lender may decide to continue with the loan process.
Can You Quit a job before closing a home loan?
Quitting your job before closing will put your mortgage loan at risk. Lenders won’t approve your home loan if you don’t have enough income to make the loan’s monthly payments. You may be able to quit a part-time job if you aren’t using the income to qualify for your loan.
Can you buy a house if you lose a job?
Depending on the nature of the job loss, you could possibly still purchase the property, although your lender will likely delay closing. If you’re furloughed, which is a temporary leave of absence, your lender might not immediately cancel the mortgage, since you could return to work before your scheduled closing date.