How To Prevent Mortgage Default With Loss Of Employment

How To Prevent Mortgage Default With Loss Of Employment

This BLOG On How To Prevent Mortgage Default With Loss Of Employment Was UPDATED On January 27th, 2018

A person’s home is their single largest investment for most folks. Nobody wants to have a mortgage default. Unfortunately there are times in people’s lives where they become unemployed due to involuntary and/or voluntary employment termination. When there is a job loss, the household income stream stops. There are ways to prevent mortgage default when homeowners have a loss of employment and avoid Mortgage Default.

  • When a mortgage lender approves borrowers for a mortgage loan, the underwriter looks not only at the following:
    • Credit
    • Credit scores
    • Credit history
    • Debt
    • Assets
    • Liabilities

But most importantly, they look at income and employment history. Mortgage Underwriters main concern is that borrowers meet all mortgage guidelines as well as have the ability to repay their mortgage. Underwriters will only approve borrowers for a residential mortgage loan only if they feel that employment will likely to continue for many years to come.

  • Unfortunately, there are cases where a person purchased a home with a new mortgage loan recently but have gotten laid off from their job or terminated
  • This is an extremely stressful situation for not just the homeowner, but the mortgage lender as well
  • For example, I just closed on a mortgage loan for a client last June, 2017
  • My borrower just contacted me that the company he has been with for over 3 years has told him that they were going to terminate his employment
  • Reason being was because the company have lost several major contracts
  • This borrower is the sole income provider for his household
  • Borrower contacted me if there are any options for unemployed homeowners
  • The good news is that there is help available for unemployed homeowners
  • Almost all mortgage lenders are eager to help unemployed homeowners in helping them with a mortgage payment plan while they are seeking other full time work
  • The federal government has strict rules and regulations for mortgage lenders to work with unemployed homeowners with a repayment plan to avoid foreclosures

Housing Counselor Will Help Unemployed Homeowners To Avoid Mortgage Default

I strongly recommend that homeowners contact a HUD approved housing counselor and explain situation of being an unemployed homeowner.

  • A HUD approved counselor is certified in dealing with unemployed homeowners
  • They will advise on the various options
  • They will explain rights homeowners have as an unemployed homeowner
  • Will help work with mortgage lender in helping them avoid mortgage default and foreclosure
  • The HUD approved counselor will be knowledgeable with the Federal loan modification programs and other forms of mortgage workout
  • Can assist with repayment programs homeowners might qualify for
  • To get a list of HUD approved counselors in area, contact 800-569-4287

Contact Mortgage Lender

Unemployed homeowners need to contact their mortgage service provider as soon as they get news that they will become unemployed.

  • It is best to contact mortgage loan service provider prior to being late on mortgage payments
  • There are repayment programs for unemployed homeowners
  • Unemployment homeowners can qualify only if they have not been late or are currently late on their mortgage payments
  • So it is crucial that homeowners contact mortgage loan service provider the minute they hear the bad news
  • As of August 1, 2010, the federal government has implemented the Making Home Affordable Modification Program
  • This program offers assistance and benefits for unemployed homeowners who are current on unemployment benefits
  • Under this federal assistance program for unemployed homeowners, the homeowner gets a reduced monthly mortgage payment where the adjusted mortgage payment will be not more than 31% of household gross income
  • For unemployed homeowners who have no income, the mortgage loan service provider can temporarily suspend the entire mortgage payments entirely until the homeowner becomes employed again
  • There will be many forms that borrowers need to sign
  • They need to provide many documentations to mortgage loan service provider such as proof of unemployment benefits

Government Assistance For Unemployed Homeowners

Unemployed homeowners should contact their state and see if their state has assistance programs for unemployed homeowners.

  • There are states, like the state of California, where they have assistance for unemployed homeowners
  • The state of California has unemployed homeowners assistance programs
  • The state will cover up to six months of mortgage payments for unemployed homeowners who have been involuntarily unemployed

Prolonged Period Of Unemployment

Unemployed homeowners who do not see a light at the end of the tunnel and do not forsee employment in the near future may need to consider other options.

  • Unemployed homeowners who become underemployed but forecast job stability with lower income may consider requesting the mortgage lender a loan modification
  • If unemployed homeowners do not see any forms of employment in the near future, then a short sale or deed in lieu of foreclosure may be the other option in order to avoid foreclosure

People go through hard times. Homeowners who have no other options but to lose their home to foreclosure, deed in lieu of foreclosure, short sale can qualify for home loan after the housing event. The U.S. Department of Housing and Urban Development (HUD), the parent of The Federal Housing Administration (FHA) has very lenient guidelines for home buyers who had prior bankruptcy and/or housing event.

Qualifying For FHA Loans After Housing Event

The Gustan Cho Team at USA Mortgage is a direct lender with no overlays on government and conventional loans. Here are the waiting period requirements to qualify for FHA Loans After Housing Event:

  • Minimum credit score of 580 to qualify for 3.5% down payment FHA Home Purchase Loan
  • One year waiting period after loan modification
  • Three year waiting period after foreclosure, deed in lieu of foreclosure, short sale

Home Buyers can qualify for NON-QM Loans where there is no waiting period after housing event. However, 20% down payment is required and mortgage rates are slightly higher than government and conventional loans. To qualify please contact us at The Gustan Cho Team at USA Mortgage at 262-716-8151 or email us at gcho@usa-mortgage.com.

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