Temporary Unemployment Mortgage Guidelines On Home Purchases

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This ARTICLE On Temporary Unemployment Mortgage Guidelines On Home Purchases Was PUBLISHED On September 14th, 2020
Temporary Unemployment Mortgage Guidelines:
  • The coronavirus pandemic that hit the United States sent millions of Americans to the unemployment line
  • The U.S. economy was booming with no signs of any correction prior to the coronavirus pandemic
  • However, millions of American companies temporarily laid off millions of workers due to the COVID-19 outbreak
  • Over 50 million Americans have filed for unemployment
  • However, the economy is doing much better than expected
  • The housing market is better now than it was prior to the COVID-19 outbreak
  • With mortgage rates at historic lows, housing demand exceeds supply by a wide margin
  • 30-year fixed-rate mortgage rates are at 2.86% for prime borrowers
  • Many homebuyers who were pre-approved prior to the coronavirus pandemic lost their jobs
  • However, many of these folks were temporarily laid off and are expected to return to work soon
  • Others still remain unemployed
  • Yet, others have been permanently laid off
  • However, many temporarily unemployed workers who were pre-approved are still interested in pursuing with their home purchase once they are re-employed
In this article, we will discuss and cover the Temporary Unemployment Mortgage Guidelines On Home Purchases.
How Will Temporary Unemployment Impact My Ability To Purchase A Home?

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 surpassed the 29,000 mark which made history
  • 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
  • However, 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

In this article, we will discuss and cover your options in qualifying for a mortgage while on temporarily unemployed and its guidelines.

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 and/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.

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.

Jammi Cash is a vice president of mortgage banking at Gustan Cho Associates. Jammi is an expert in helping borrowers qualify for a home mortgage after periods of unemployment.

Jammi said the following:

While collecting unemployment or being without work does not directly affect your credit score, there are some indirect impacts it can have. For example, if you’ve had to max out credit cards or apply for new ones to be able to pay for bills or other necessities, having multiple inquiries on your credit report or a high credit utilization can negatively impact your credit score. Your debt to income ratios will include a few factors in it, such as auto loans, rent payments, credit card balances, and other monthly payments you may be making at the time of your mortgage application. When unemployment hits, you are still required to make those monthly payments without the income you once had. If your debt-to-income ratio is too high or has increased due to the need to rely on credit cards or other loans for bill payments, you may be considered a more-risky borrower. Once you have money-flow again, you may have to spend a good amount of time paying down any debts that were accumulated during that time to lower your borrower risk factor.

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. Michelle McCue is a vice president of Gustan Cho Associates and one of GCA Mortgage Group top producers.

Michelle McCue said the following:

If unemployment has caused you to have to dip into your savings or accumulate more credit card debt, creating a financial plan can be a great way to get back on track once you have found employment again. This plan should include an outline of your income and the amount you owe, as well as how much you would like to save each month. Using a budgeting app such as Mint or a method like the50/30/20 method can help you pay down debt and save for that down payment you need.

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 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com. The team at GCA Mortgage Group is available 7 days a week, evenings, weekends, and holidays.

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