How to Close on a Mortgage If You Were Laid Off Due to COVID-19

The current global crisis has resulted in a lot of people being laid off or furloughed. If you were in the process of closing on a house, you might be wondering if you have any chance of still being able to move.

So, what should you do?

Tell Your Bank

It’s literally fraud to try and conceal the loss from your bank. They will find out and you could end up facing criminal charges in court. Most likely they will find out when and if you don’t make a payment, but they will also do a last minute check a few days before closing, calling your employer to find out if you still work there. Honesty is your best policy, even if it does mean you lose the loan. In the current circumstances, lenders may well be more flexible; if you were furloughed or promised that you will be re-hired they may still be willing to take a risk on you.

Be aware that talking your employer into keeping you on payroll another week won’t work; the bank will probably smell a rat.

Recalculate Your Income

If your partner is still working, can you still afford the mortgage? It might hurt to walk away, but if you can’t actually afford it, you will end up in a much worse state. Recalculate and see if the loan payments are still within your reach. If you were furloughed rather than laid off, consider how long the crisis might last; then double it.

Look Into Alternative Qualification

Most of us can’t buy a house outright, but you might be able to find another way to do things. One way would be to have a trusted friend or relative co-sign the loan; if you are confident you will find employment again quickly this might be a good option. If not, it might be a friendship-ending choice.

If you have a lot in savings you may also be able to put in a higher deposit to drop the amount of the loan to your new income. Consider this only if you are sure you won’t need that money for living expenses. The same goes if you get a substantial severance package, but many employers are unable to afford those during the crisis.

Be ready to pull out all the stops to prove that you can afford the house even without that job. This might mean pulling money out of retirement savings,  It might mean demonstrating assets you have that can be converted easily, such as stocks or bonds. If there is anything you can do to improve your credit score, do it.

Find Out What Your Lender Can Do For You

Fannie Mae and Freddie Mac have relaxed their standards for verification of employment, which is helping people who are employed but who’s workplace is currently shut down. If your layoff is confirmed to be temporary, you may be able to close. More likely your lender will hit pause on the process until you are back on the job, but they may be willing to let you keep loan approval, meaning that even if you can’t get the same house you should be able to start looking again as soon as you have employment.

Lenders are generally being more flexible than they are in normal circumstances, however they still want to make sure you are a good risk. The good news if you can’t close is that interest rates and property values are likely to stay low for a while; you may actually be able to get a better deal on a larger place after this is over.

If you are determined to buy the place you are looking at, though, you will need to be willing to look at your options such as getting a co-signer or dipping into your savings to increase your down payment. For more information and advice about what to do about getting a mortgage in these turbulent times, contact Atlantic Home Mortgage today.