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 right before closing on a mortgage can feel like a financial nightmare. But don’t panic just yet! While it’s definitely a stressful situation, there are steps you can take to navigate this challenge and still achieve your homeownership dream.
The First Step: Transparency and Communication
The first and most crucial step is to immediately inform your lender about your job loss Be upfront and honest about the situation, providing them with details about the circumstances and your future employment prospects This transparency will allow your lender to assess your options and work with you to find a solution.
Assessing Your Options: A Tailored Approach
Depending on the specifics of your situation, you may have several options available:
- Downsizing Your Loan: If your income has significantly decreased, you may need to consider downsizing your loan amount. This means purchasing a less expensive home that fits your new budget.
- Delaying Closing: In some cases, it may be possible to delay your closing date until you find a new job or your income stabilizes. However, this option may come with additional costs, such as extending your rate lock or incurring storage fees for your belongings.
- Seeking Co-Signer Support: If you have a friend or family member with a strong credit history and stable income, they may be willing to co-sign your loan. This can help you qualify for the mortgage despite your job loss.
- Exploring Loan Modifications: Depending on your lender and the specific circumstances of your job loss, you may be eligible for loan modifications such as forbearance or loan restructuring. These options can provide temporary relief from your mortgage payments while you get back on your feet.
Additional Considerations: Navigating the Financial Landscape
- Unemployment Benefits: While unemployment benefits typically cannot be used to qualify for a mortgage, they can provide some financial support during this challenging time.
- Savings and Emergency Funds: If you have savings or an emergency fund, now is the time to utilize them. This can help cover your living expenses and mortgage payments while you search for a new job.
- Credit Score Impact: Losing your job can negatively impact your credit score. However, by making timely payments on your existing debts and managing your finances responsibly, you can minimize the damage.
Remember, communication is key. Maintaining open and honest communication with your lender throughout this process is crucial. They can provide guidance and support as you navigate your options and work towards a solution.
Additional Resources:
- NerdWallet: What Happens If You Lose Your Job Right Before Closing on a Mortgage?
- Chase Bank: Losing Your Job During the Mortgage Process
Disclaimer: This information is for educational purposes only and should not be considered financial advice. Always consult with a qualified financial professional before making any decisions.
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.
So, What Really Happens In 2024 If I Lose My Job Before Closing A Mortgage?
Depending on the reason behind losing your job, you may still be able to purchase property. However, it is also likely that the lender will delay closing or cancel your approval of a type of mortgage loan .
Keep in mind that getting pre-approved for a loan does not guarantee closing. This just means that you can likely be approved by completing the mortgage process.
Therefore, any change that affects your income, employment, or credit prior to closing affects your mortgage qualification.
We invite you to read more about the requirements to apply for a mortgage in New Jersey as well as our advice on what not to do when applying for a mortgage loan in order to better understand what happens if you lose your job before closing on a mortgage loan.
What if you lose your job while applying for a Home Loan?
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 mortgage?
If you lose your job before you close on a mortgage, you should tell the lender immediately and explain what happened. Failure to do so will be considered mortgage fraud. Remember that your mortgage provider verifies your employment status and income before approving the loan.
What happens if I get a new job before closing?
You are still unemployed a few days before the closing date. You are permanently fired from your job. If you get a new job relatively quickly, this may save your mortgage. However, your lender may require you to stay in your new job for at least 30 days before closing. Besides: Your new job must be in the same field as your old one.
What happens if I Lose my job?
Your lender’s decision to continue with the application may depend on whether you lose your job momentarily or permanently. For example, if you are furloughed (temporarily laid off) from your job, you must explain your situation to the lender in a written letter talking about when you expect to return to work.
What should I do if I Lose my job?
The most important thing to do after you lose your job is contact your lender. Explain your situation and ask about the options available if you wish to move forward. Then ask your lender to temporarily pause your application while you follow the steps below. 2. Secure a new job Launching an aggressive job search is critical.