Job Loss After Mortgage Closing

What Happens If Homeowners Has Job Loss After Mortgage Closing

Gustan Cho Associates are mortgage brokers licensed in 48 states

This Article Is About What Happens If Homeowners Has Job Loss After Mortgage Closing

The mortgage meltdown and overhaul of the mortgage industry have totally revamped mortgage lending guidelines on residential mortgage loans. Days of no doc and stated income mortgage loans are no longer available. No doc loans and stated income loans have been extinct for years. Does not seem that it will ever come back. All sub-prime mortgage lenders all went out of business. The rules and regulations on residential mortgage lending have changed so much that even hard money lenders need to abide by RESPA  rules and laws governing residential mortgage lending. The government overly created new regulations. New regulations were created so it can avoid future mortgage meltdown and minimize foreclosures. The whole real estate and mortgage lending industry came to an abrupt halt. This was due to the real estate and mortgage collapse. Real estate values came tumbling down. In some parts of the country, values plummeted by 50% or more. Fortunately, new lending guidelines and requirements for homebuyers were created for buyers who had prior bankruptcy and foreclosure. Real estate values made a comeback in many parts of the country.

Buying Home In High-Cost Areas

Buying Home In High-Cost Areas

Many areas of California such as the following are considered high-cost areas. County loan limits in high-cost areas are higher:

  • Los Angeles
  • San Diego
  • Irvine
  • San Francisco
  • San Jose
  • Sacramento
  • Malibu
  • Pasadena
  • Burbank
  • Palm Springs
  • Modesto
  • La Jolla
  • Lake Tahoe
  • Oakland
  • Santa Monica
  • Santa Barbara
  • Redlands
  • Covina
  • Santa Cruz
  • Riverside
  • And many other parts of California have almost recovered fully from the real estate market crash

The most important factor in qualifying for a mortgage loan is income. If homeowners have job loss after mortgage closing, contact the lender immediately.

Buyers Can Have Bad And Qualify For Mortgage

Home Buyers can have bad credit and qualify for a mortgage. Home Buyers with qualified income with the likelihood to continue for the next three years will qualify for a mortgage loan eventually. However, for those with perfect credit but who do not have income, it will be difficult to qualify for a mortgage until they have documented income. Lenders are paranoid about the stability of every borrower’s ability to repay their mortgage payments timely after closing. They want to make sure borrowers’ job stability is strong and borrowers are able to remain employed. Without income, borrowers cannot pay their mortgage payments. This will cause the home to go into foreclosure. Lenders are not real estate investors. They want to avoid foreclosure proceedings at all levels. They will work with homeowners who had a job loss or are having a tough time financially after closing.

Job Loss After Mortgage Closing: Importance Of Verification Of Employment

Job Loss After Mortgage Closing

There is a reason why underwriters want to see two-year employment history, two years of tax returns, two years W-2s, most recent 30 days paycheck stubs, and verification of employment. The lender is trying to determine borrowers have a solid job and income will be secure for the next three years. This is important so mortgage loan does not go into default and into foreclosure.

Job Loss After Mortgage Closing: Is Job Stable?

Lenders can determine the job will be stable and all employment verification can pass with flying colors. The lender’s worst nightmare will be if the borrower had a job loss after mortgage closing. However, borrowers should know better than any lender doing verification of employment on the stability of income. Borrowers who feel that their job is not stable or are planning on making a move or employer is planning on selling their business may want to postpone closing on their home loan. Buying a new home comes with a great deal of responsibility. Need to make sure job and income will be stable. Homeowners need to be able to afford housing payments as well as other expenses.

Notify Lender If You Have Job Loss After Mortgage Closing

Job Loss After Mortgage Closing

Homeowners with job loss after closing on a mortgage, contact the lender immediately. Do not try to make mortgage payments if you do not know that you can make mortgage payments in full.
If not sure they can come up with the money and find out at the last minute they cannot make it. Notify the lender’s servicing department immediately. Tell them that you have been current on a mortgage loan but you just lost a job. Lenders will work with homeowners if you notify them immediately after job loss after the mortgage closing. Not notifying mortgage lenders of job loss after mortgage closing may create issues. Becoming delinquent and missing mortgage payments and then notifying them, they will be less likely to work with homeowners. However, if homeowners have been timely but sustained a job loss, the lender will ask the borrower to provide and complete a personal financial statement. They will request to provide them with proof of termination. Lenders may work in giving borrowers a forbearance period until they regain full-time employment. There are many options lenders may offer. A loan modification is one of them in the event if you get a job where the income is substantially less.

Loan Modification Process

Loan modifications will reduce monthly payments that you need to make to the lender where the lender may reduce the interest rate and/or extend the life of the loan:

  • If borrowers regain employment and are making the same amount they were making from the previous employer, the lender may do a loan workout
  • This is where they may roll the deficit of delinquent mortgage payments to the back of the mortgage loan and spread out the escrow shortage over 60 months
  • Monthly mortgage payments may increase slightly due to making the escrow shortage payment but not by much
  • Lenders do not want to foreclose the property

Lenders will do everything possible to work with borrowers in the event of a job loss after the mortgage closing.

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