Lost Job Before Closing on a House? Here’s What to Do

Answer

Losing your job before closing on a home can be a stressful situation, especially if you’re relying on your income to secure financing. However, there are steps you can take to address this issue and minimize the impact on your home purchase. Here's what to do if you lose your job before closing:

1. Review Your Contract and Loan Terms: The first thing you should do is carefully review your purchase agreement and the terms of your mortgage. Most real estate contracts include contingencies that allow you to cancel the sale if certain conditions change. However, losing your job could jeopardize your financing, especially if your lender requires proof of employment or steady income. It’s essential to understand your obligations and your options before moving forward.

2. Contact Your Lender Immediately: Communication with your lender is key. As soon as you lose your job, inform your lender about the situation. Lenders typically require verification of employment up until closing, and failure to provide this can result in the loan being denied. If you’ve already started working at a new job, or if you have other sources of income, let the lender know right away. They may be able to work with you to adjust the terms or move forward with alternative documentation, like a job offer letter or proof of savings.

3. Consider Alternative Sources of Income: If you’ve lost your job but have other sources of income, such as freelance work, severance pay, savings, or a spouse’s income, provide proof of these to your lender. In some cases, lenders might still be willing to approve your loan if you can demonstrate that you have sufficient resources to make the mortgage payments. If possible, showing that you have a plan to secure stable employment can help reassure the lender.

4. Look for New Employment Quickly: If you haven’t found new employment yet, it’s important to begin your job search immediately. If you’re in the middle of interviews or have received a job offer, provide your lender with that information to show you’re actively working on securing a new position. A lender may be more willing to proceed if they know you’re close to obtaining new employment, as this will help assure them that you will have income to support your mortgage payments once you close.

5. Postpone the Closing: In some cases, it may be possible to delay the closing date to give you time to secure new employment or for your lender to reassess your financial situation. A short delay could give you the breathing room needed to stabilize your income situation. However, keep in mind that both the seller and lender will need to agree to any changes in the timeline. Delaying the closing may also require you to negotiate with the seller to extend the timeline for the sale.

6. Reassess Your Financial Situation: Losing your job could impact more than just your ability to qualify for the mortgage; it could affect your overall financial stability. Take a step back and evaluate your finances to determine if you can still afford the home with your current situation. If your income is significantly reduced or if your savings are insufficient to cover the mortgage, you may need to consider whether purchasing the home is still a wise decision. If you’re unsure, consulting a financial advisor could be helpful in making an informed choice.

7. Discuss Your Options with Your Real Estate Agent: It’s important to keep your real estate agent in the loop. They can help you navigate the situation and may have insights into how best to proceed. If necessary, they can also help you negotiate a more flexible timeline or assist in canceling the contract without penalty if the financing falls through due to job loss.

8. Consider Walking Away from the Deal: If all else fails, and you can’t secure the necessary financing or find a new job quickly enough, you may need to walk away from the deal. Depending on the terms of your purchase agreement, you may be able to do this without facing severe financial consequences, especially if there’s an employment contingency or other clauses that protect you. Walking away may also mean losing your earnest money deposit, but it could be the best decision for your long-term financial health.

Conclusion: Losing your job before closing on a house doesn’t automatically mean the end of the transaction, but it can complicate things. The key is to act quickly by contacting your lender, exploring alternative sources of income, and being proactive about finding new employment. If necessary, you can delay the closing or reassess your financial situation with the help of professionals. By staying calm and informed, you can find the best solution and move forward with a purchase that’s right for you.