When you’re waiting for approval on your mortgage application, we’ll advise you to steer clear of a few (super fun) things, such as making a large purchase (for example, a cool new car or boat), applying for new credit, and additional pulls on your credit bureau, etc. These can lead to your application getting declined.
Another issue that we want to avoid (if at all possible) is job loss and certain changes to your employment. However, that’s not always in our power.
In this blog, we’ll go over how job loss can affect your mortgage application, how to deal with it, and what remedies (if any) can be put in place.
So, your employment circumstances have changed. Now what?
When qualifying for a mortgage, one of the key factors that lenders will look at is your income. If you have already qualified for a mortgage, but your employment circumstances have changed, your first step is to disclose this to your lender. They will move to verify your income prior to closing and, if they have not been told in advance, it may be considered fraud as your application income and closing income would not match.
In some cases, the loss of your job may not affect your mortgage. See the following examples.
You have a co-signer on the mortgage who earns enough income to qualify for the value on their own. In this case, be sure to inform your co-signer of your current employment situation.
You have additional sources of income such as income from retirement, investments, rentals, or even child support which may be considered, depending on the lender.
You secured a new job right away in the same field as your previous job. In this case, keep in mind, you will still need to requalify for your mortgage. However, it’s important to note, if your new job requires a 3-month probationary period then you may not be approved.
You were furloughed. Now what?
If you did not lose your job entirely but instead have been furloughed or temporarily laid off, your lender may take a wait-and-see approach to your mortgage application. If you were in this situation, you would be required to provide a letter from your employer showing the date that you’re expected to return to the work place. However, if you don’t return to work before the closing date, your lender may be required to cancel the application for now, however, resubmitting would be an option in the future.
Can you use unemployment income?
Generally, no, unemployment income is not a suitable source of income to qualify for a mortgage. However, in some rare cases, for individuals with a seasonal or cyclical job who rely on unemployment income for a portion of the year, unemployment income may be considered for them. In these cases, you would be asked to provide a two-year cycle of employment followed by Employment Insurance benefits.
Talk to a mortgage professional
If you already have a trusted mortgage professional, give them a call asap, otherwise, please give me a call. Regardless of the reason for the change in your employment situation, one of the most important things you can do is contact a mortgage professional directly to discuss your current situation.
Job loss and unexpected changes can be extremely stressful, and even more so when you throw a mortgage into the mix. We’re here to help, so don’t hesitate to reach out. Together, we will look at all the options for you and help with finding a solution that best suits your unique needs.
Any questions? Give me a call! Always happy to help!
Nadia
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