After searching for the perfect house, homebuyers may worry about what will happen if they lose their jobs before closing on the property. Unfortunately, this does happen, and, if you find yourself in this situation, you must be honest with your lender. Failing to disclose that you’ve lost your job could be considered mortgage fraud. Most mortgage companies call employers a few days before closing to verify employment as an extra precaution after the housing boom and bust, when many homebuyers lost their jobs and failed to disclose this.
There’s a chance that losing your job won’t impact your loan. If your mortgage application is a joint effort with your spouse, it's possible your debt-to-income ratio won’t drop to a level that will disqualify you for the loan, if your spouse earns a high enough income. If your mortgage was for an amount significantly less than you could have afforded with your previous job, your chances of remaining approved for a loan increase.
Even if you manage to get a new job right away, the closing date could be pushed back. The lender may need extra time to verify your job status and income with your new employer. This doesn’t mean your loan will be denied. It’s just a way for lenders to safeguard their investments, to make sure you’ll still be able to afford your monthly payments.
Even if you were preapproved for the loan, the lender could decide to deny your application after you lose your job. Without a job or at a new job earning a lower salary, you may be considered too much of a risk for the lender to take a chance on. Lenders also consider you a high risk if you’ve found a new job in a different industry from the one in which you were previously employed or if you’re under a probationary period at your new job, as this displays zero job security.
It’s possible that your lender will still be willing to finance your mortgage, but for less than the original amount approved. While this may ruin the deal you currently have on a home, it just means you’ll have to search again for something more affordable. Although this can be discouraging, it’s reassuring to know that you’re able to qualify for a mortgage.
Laura Woods is a Los Angeles-based writer with more than six years of marketing experience. She has a Bachelor of Arts in communications from the University of Pittsburgh and an MBA from Robert Morris University.