Gustan Cho The Mortgage Expert,
Publish On: March 21, 2024
With mortgage rates at historic highs, housing demand still exceeds supply by a wide margin. 30-year fixed-rate mortgage rates are at 6.86% for prime borrowers.
Temporary Unemployment Mortgage Guidelines Due To The COVID-19 Pandemic
The U.S. economy was booming prior to the coronavirus outbreak. Unemployment numbers reached a historic low of under 3.5%. The Dow Jones Industrial Averages is about to surpass the 40,000 mark which is the historic high. Other equity markets followed the Dow and hit historic highs. Then the coronavirus outbreak hit the United States and everything went spiraling down. States were shutdown. Non-essential businesses were ordered closed by local, county, and state politicians.
The U.S unemployment numbers hit a historic low. Many people were eager, willing, and excited in getting a mortgage pre-approval and becoming homeowners this year.
The coronavirus outbreak forced many lenders to revoke the pre-approvals, conditional loan approvals, and clear to close that were issued. Gustan Cho Associates get countless calls and inquiries daily about how temporary unemployment can impact your home buying dreams. Many also ask whether or not they can qualify for a home mortgage while unemployed. Your options in qualifying for a mortgage while on temporarily unemployed and its guidelines. Talk to our lender to apply for your mortgage with no overlay
Temporary Unemployment Mortgage Guidelines for Homebuyers
When a borrower experiences temporary unemployment, mortgage lenders have specific guidelines and considerations for approving or modifying an existing mortgage loan. Here are some typical guidelines regarding temporary unemployment and mortgages. Lenders will require documentation to verify the borrower’s unemployment status, such as termination letters, severance agreements, or unemployment benefit statements.
Employment History
A solid employment history prior to the unemployment period can work in the borrower’s favor. Lenders prefer to see at least 2 years of consistent employment before the job loss. Lenders will evaluate any alternative income sources the borrower may have, such as severance pay, unemployment benefits, investment income, or spousal income.
For existing mortgages, lenders may offer loan modifications or forbearance plans to temporarily reduce or suspend payments until the borrower regains employment.
If the borrower has already secured a new job, lenders will assess the income continuity and stability of the new employment. A strong credit history and low debt-to-income ratio before unemployment can increase the lender’s confidence in the borrower’s ability to recover financially. Borrowers may need to provide a detailed plan outlining their job search efforts and prospects for new employment.
Waiting Period Guidelines After Unemployment
Some lenders may require a waiting period (e.g., 6-12 months) of consistent income from the new employment before approving a mortgage. Certain loan programs, such as FHA or VA, may have more flexible guidelines for temporary unemployment compared to conventional loans. The specific requirements and guidelines can vary among lenders, but generally, they aim to assess the borrower’s ability to resume making mortgage payments within a reasonable timeframe after temporary unemployment. Open communication with the lender and providing comprehensive documentation are crucial in these situations.
The Importance of Credit and Employment
Credit and employment are the two main factors when it comes to qualifying for a home mortgage. The borrower’s credit history and scores show the past pattern of the borrower’s payment patterns over time. This is how lenders determine the borrower’s potential payment on a new home mortgage by judging their prior payment history.
Employment history and employment are important due to income and the ability to repay. The ability of the borrower to be employed for the next three years is taken under serious consideration.
What good is it if a borrower gets laid off as soon as he or she closes on their home mortgage. It will be impossible to get a mortgage if you are unemployed. This holds true whether it is temporary or permanent unemployment. However, right after the borrower starts a new job, they can qualify for a home mortgage.
Employment Gaps And Temporary Unemployment Mortgage Guidelines
Homebuyers who are temporarily unemployed cannot qualify for a home mortgage while unemployed. However, they can qualify for a mortgage as soon as they return to work to the same job. There are no waiting period requirements on a job after a temporarily unemployed worker goes back to the same job. There are no waiting period requirements for an unemployed worker to start a new job (it can be in a different field) as long as the employment gap was less than six months. However, if the unemployed worker starts a new job and has been unemployed for six or more months, the worker needs to be in their new job for at least six months. Click here to apply for your mortgage with employment gaps
Paying Bills During Unemployment Period
Make sure to pay the minimum monthly payments that report on your credit bureaus during the period of unemployment. One late payment on any credit tradelines can delay your mortgage qualification for 12 to 24 months. One late payment will plummet your credit scores as well. Alex Carlcucci is a senior loan officer at Gustan Cho Associates. Alex is an expert in helping borrowers qualify for a home mortgage after periods of unemployment.
Managing Debt Through Periods of Temporary Unemployment
Most temporarily unemployed workers will receive unemployment benefits. Many get discounted wages during the period of temporary unemployment. It is very important that you balance your budget where you make the bare minimum payment due to your creditors if you are planning on qualifying for a mortgage after you start work again. Dale Elenteny of Gustan Cho Associates and one of Gustan Cho Associates top producers said the following:
Having sufficient liquid assets or cash reserves is crucial during unemployment. Lenders may require enough reserves to cover several months of mortgage payments and living expenses.
To qualify for a home mortgage with a five-star national mortgage company licensed in multiple states with no lender overlays, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.
