Mortgage Process

Loss Of Job During Mortgage Process

Gustan Cho Associates

Income is probably the most important factor to qualify for a mortgage loan.  You can have prior bad credit, prior bankruptcy, prior foreclosure, and low credit scores and if you have documented income, you will qualify for a mortgage loan.  If you have perfect credit, high credit scores, and good assets but you do not have documented income, you will not qualify for a mortgage loan.  Your mortgage lender will only approve you and let you close on your mortgage loan only if you have a full time job or stable income and that job and/or income will continue so you are able to pay for your mortgage payment.  This requirement is not just a mortgage lender’s guidelines but also federal mortgage lending guidelines.

Income Qualification In Mortgage Process

Before a mortgage lender issues you a pre-approval, the loan originator will require you to submit your two years tax returns, two years W-2s, and 30 days of paycheck stubs to make sure that you qualify.  Your mortgage lender will also do a verification of employment where they will send a questionnaire to your employer to complete as of how long you have worked there, how much income you make, and how much your overtime income and/or bonus income you make and have made the past two years.  Besides verifying your income and employment status, your mortgage lender needs to feel comfortable with the likelihood of your continued employment so they feel comfortable that you are able to make your mortgage payment.

There are two phases of verification of employment for most mortgage lender.  The initial and most important verification of employment is done during the mortgage approval process and it is a written verification of employment.  Most, not all, mortgage lenders will also do a verbal verification of employment prior to issuing a clear to close.  A clear to close is when a mortgage lender is clear to fund the mortgage loan.

Loss Of Job After Mortgage Lender Issues Clear To Close

A mortgage loan closing can happen the same day or several days or a week or two after getting a clear to close.  There are times where a mortgage loan borrower has a loss of job after the mortgage lender issues a clear to close.  This will definitely be a deal killer and most mortgage loan borrowers know this.  Many still want to purchase and close on their home even though they have a loss job and feel confident that they can still afford their monthly mortgage payment because they feel confident they can easily re-gain employment.  Unfortunately, this is not always the case and if it is not the case, the mortgage loan borrower will likely not be able to make their mortgage payment and their brand new mortgage loan will likely go into default.

Verification Of Employment Prior To Clear To Close

If you have lost your job during the mortgage approval process, even if it is after your clear to close, you must notify your mortgage lender and not close on your home loan.  If you get another job and you do not default on your mortgage loan, then it will be a non-issue, however, if you are defaulting on your new mortgage payment, your mortgage lender will definitely open an audit and investigation on your file and do some intense background checking.  If they find out, and the chances are they will most likely will, that you have had a loss of job during the mortgage approval process, heads will definitely roll.  If they find out that you new about your loss of job during the mortgage approval process or you had someone from the Human Resources lie on your behalf that you were employed when in fact you were not, everyone involved can get charged with mortgage fraud.  Mortgage fraud is a felony and an excuse of just playing dumb and telling federal fraud investigators will not work.  Mortgage fraud is punishable up to 30 years in federal prison and no mortgage loan in this world is worth being investigated for mortgage fraud.  In the event if you had a loss of job, tell your mortgage lender immediately.  Once you re-gained full time employment, you can get approved for another mortgage loan.  All you need is a verification of employment from your new employer and 30 days of paycheck stubs from your new full time job to be able to close on your loan.
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