"Our offer on a house was
accepted, we've been prequalified, the loan officer is coming out tomorrow to
take my application, and I just got fired from my job. What should I tell the
loan officer and what will this do to our loan? What if I find a job in the next
few days that pays the same or more? I have been on my job for 1 1/2 years and
have been in the same field for 8 yrs. We are first time buyers and are getting
an FHA loan."
This is a tough
break that you don't want to make any worse than it has to be. You must
tell the loan officer what has happened immediately. If you let the process go
forward, they will get the bad news anyway when they send out an employment
verification request to your ex-employer. Then they will be annoyed at you for
deceiving them and wasting their time, and reluctant to expend the extra effort
that may be needed from them down the road.
Ordinarily the first thing the loan
officer will do in a situation like this is to see if there is a way of
recasting the loan so that the borrower's income can be disregarded. This could
require a substantial increase in down payment, however, or an increase in the
interest rate. Since you are a first time buyer it is unlikely that this
approach will work for you.
I'm sure the loan officer will encourage
you to find another job quickly, as the best possible way of salvaging the deal,
with the application placed on hold in the meantime. If you do find another job
that pays as well, you can reapply, assuming you have enough time remaining
before the house closing. Your new application won't be quite as strong as the
old one because your income will be viewed as less stable, but you should still
be OK, especially on an FHA.
If you can't find a job soon enough to
do the deal, you should immediately notify the house seller that you are not
going to be able to close. I hope there is a mortgage contingency clause in your
offer that nullifies the deal in the event you can't find a mortgage. Recovering
your deposit will cut your losses from this bad twist of fate.
Copyright Jack Guttentag
2002
Jack Guttentag is Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania. Visit the Mortgage Professor's web site for more answers to commonly asked questions.
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