I lost my job before closing – what can I do?

November 2, 2016

Closing on a new home is equal parts exciting and nerve-wracking. Everything will probably end up working out, but it’s hard to ignore the little voice in the back of your head reminding you that something could still go wrong.

Sometimes, that voice is right.

When you lose your job while trying to close on a home, it can feel like the world is falling apart. It’s like a new chapter in your life is being ripped out and replaced with a blank page. The uncertainty can be crushing.

Thankfully, losing your job doesn’t have to mean losing your new home. Here are some ways you can deal with sudden unemployment during the home-buying process.

Talk to Your Loan Officer

Even though there’s a chance you could slip your job loss past your loan officer, it’s not good practice. They could find out anyway, making it unlikely that they’ll work with you again. Many officers call the employer the day of closing for additional verification, so the odds are slim that you’d get away with it.

Also, not telling the loan servicer could constitute mortgage fraud if you’ve signed documents saying you’ll be honest about your employment status. Your loan officer may be more helpful than you realize, and could be more willing to work with you – if you come to them first.

See What Your Options Are

Many loan officers allow you to get out of escrow without losing your down payment in the event of sudden unemployment. If you’re married and can qualify for the mortgage solely based on your partner’s salary, you may still be able to get the mortgage with one person’s name on the loan.

Some people bring in a co-signer if they don’t qualify alone, or if their spouse lost their job. Co-signing can improve your chances of getting a mortgage but can wreak havoc on a relationship if you fail to make payments. Plus, you’ll have to refinance and change the names on the deed if you want to remove the other person from the loan.

If you are eligible to move forward, it’s still wise to consider whether you should. Unless you’re receiving severance and/or already have a few prospects lined up, it can take weeks or even months to find a new job. Do you want the stress of a new home on top of your already full plate?

Downsize – Then Save

It’s probably best to cancel your plans if you feel uncomfortable moving ahead. Finding a new job is a likely possibility, but you never know what kind of salary and benefits you’ll have going forward.

Plus, your new position could be far away from your potential home, making it a less desirable option. Sometimes people end up have to move across the country if they lose their jobs, and who wants to deal with selling a home they just bought?

Once you get out of the mortgage process, start downsizing your expenses. If you’re at the end of your lease, you may try moving to a smaller apartment with cheaper rent. Cut any unnecessary costs until you find a new gig, after which you can resume house hunting.

Some people end up using their down payment fund for expenses while they job hunt; if this happens to you, try to rebuild both as soon as you find work. It’s not an ideal situation, so try to avoid dipping into any savings fund unless it’s necessary.

Who knows, you may earn more at your next job and qualify for a better place than you did initially. But for now, you just need to stay afloat.

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