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What Happens if I Lose My Job Right After I Sign a Mortgage?

Apr 03, 2020 by Maurie Backman

Losing your job in the middle of a mortgage application could cause that home loan to fall through. Without proof of income, lenders are generally hesitant to dish out large sums of money for borrowers to pay back.

But what happens if you lose your job shortly after signing a mortgage? At that point, your loan is locked in, and you're responsible for making your monthly payments -- which is difficult to do in the absence of an income.

And if you signed a mortgage recently, you may be in that very boat. Because of COVID-19, countless businesses are shutting down or scaling back on staff, leaving millions of workers suddenly unemployed. Here's what to do if you're now unable to pay your mortgage -- both in general or specifically due to the COVID-19 crisis.

When you lose your job during normal times

Sometimes, layoffs can happen out of the blue. If you've lost your job and don't have emergency savings to pay your mortgage while you're out of work, you can try reaching out to your lender, explaining the situation, and asking for some temporary relief. Your lender may agree to let you defer a few payments, though keep in mind that this may be a large ask if you've recently signed that loan and haven't established a solid payment history on it.

Even if you can't put your loan into forbearance, your lender may agree to let you modify the terms of your loan to make your payments more manageable. Reaching out and discussing your circumstances is the way to make that happen. Furthermore, if you have an FHA loan and you lose your job, you may be eligible for a special forbearance program that lets you hit pause on your mortgage while you seek out a new job.

If you've lost your job due to COVID-19

Normally, lenders aren't so quick to agree to forbearance, but these days, many are being much more flexible. If you've lost your job during the ongoing crisis, reach out to your lender, explain what's happened, and ask for that option.

Thanks to the recently passed CARES Act, homeowners in the midst of a financial hardship can now request up to 180 days of forbearance on a mortgage. But talk to your lender about what that entails, because the specifics can vary depending on the type of mortgage you have and who issued it.

For example, in some cases, the payments you put off during your period of forbearance may all come due simultaneously once that period ends, so make sure you understand exactly what relief you're getting. Also, during forbearance, interest may or may not accrue on your mortgage -- it depends on your loan servicer.

Losing a job after signing a mortgage is a panic-inducing event. Right now, a lot of people are without jobs, so there's more relief to be had, but even during periods of normalcy, you still have options that don't include throwing your hands up in the air and resigning yourself to foreclosure. The key is to talk to your lender and ask for help rather than assume that you're not entitled to any.

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