How To Prevent Mortgage Default With Loss Of Employment

How To Prevent Mortgage Default With Loss Of Employment

Gustan Cho Associates are mortgage brokers licensed in 48 states

This Article Is About How To Prevent Mortgage Default With Loss Of Employment

Mortgage lenders will work with homeowners who have lost their jobs. Lenders do not want to foreclose on a property if they can avoid it. They will do everything possible to help the homeowner do a workout. Most mortgage companies have workout departments where they have professionals who will try to work out repayment and/or forbearance plan with the unemployed homeowner. Many lenders will go over the homeowners’ financial situation and see how likely it will be for them to regain employment before even considering a foreclosure. In this article, we will discuss and cover ways on how to prevent mortgage default in the event of loss of employment.

Ways On How To Prevent Mortgage Default In The Event Of Unemployment

How To Prevent Mortgage Default In The Event Of Unemployment

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.

How Do Lenders Process And Underwrite Borrowers

When lenders approve 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. The mortgage underwriter’s main concern is that borrowers meet all mortgage guidelines as well as have the ability to repay their mortgage.

Borrowers Ability To Repay Mortgage Loan

Underwriters will only approve borrowers for a residential mortgage loan only if they feel that employment will likely continue for many years to come. Unfortunately, there are cases where a person purchased a home with a new mortgage loan recently but has gotten laid off from their job or terminated. This is an extremely stressful situation for not just the homeowner, but the 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.

The reason being was because the company has 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 the 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 the rights homeowners have as an unemployed homeowner. Will help work with the lender in helping them avoid mortgage default and foreclosure. The HUD-approved counselor will be knowledgeable about the Federal loan modification programs and other forms of a mortgage workout. Can assist with repayment programs homeowners might qualify for. To get a list of HUD-approved counselors in the area, contact 800-569-4287.

Contact Mortgage Lender

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 a mortgage 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 providers 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. The adjusted mortgage payment will be no 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. The mortgage will be suspended until the homeowner becomes employed again. There will be many forms that borrowers need to sign. They need to provide much documentation to mortgage loan service providers 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 foresee 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 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, a short sale can qualify for a 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 homebuyers who had prior bankruptcy and/or housing event.

Qualifying For FHA Loans After Mortgage Default

FHA Loans After Housing Event

Gustan Cho Associates is a mortgage company licensed in multiple states with no lender overlays on government and conventional loans. Here are the waiting period requirements to qualify for FHA Loans After Housing Event:

  • A minimum credit score of 580 to qualify for 3.5% down payment FHA Home Purchase Loan
  • One year waiting period after a 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 the housing event. However, a 20% down payment is required and mortgage rates are slightly higher than government and conventional loans. To qualify please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.

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