Should I tell my mortgage broker I just lost my job?
March 31, 2006 6:47 AM   Subscribe

Yesterday I got fired from a job I hate, but I'm in the middle of applying for a mortgage and I'm worried this will jeopardize my chances of getting approved. I need to know what I should tell the mortgage broker, if anything, about this whole situation.

Some facts:
I was given four weeks notice (paid), but not required to report to work.

I was also given a severance agreement- this would give me an additional two weeks pay. Don't worry- I'm having a lawyer look it over.

I was planning on (and had budgeted for) quitting my job in seven weeks- I am starting a new job over the summer, at a substantially higher income, and have documentation to support that.

This is when it gets complicated- Even though every other mortgage person I talked to said it's common to get approved for a mortgage based on future employment prospects, the broker seemed to not want to know I was quitting my job and didn't want to see the letter documenting my future income.

So it looks like the broker is trying to do my mortgage based on my present income and the fact that I am currently employed. I don't know what to tell him- how do I tell him not to call me on my work number anymore without it seeming suspicious? What am I obligated to tell him? Am I "still working" even though I'm on what amounts to paid leave?

Other information- I have excellent credit (~770), but was in school until a year ago, so my income has always been very low. I am liquidating about half my assets for the 20% down payment, and my parents are gifting me with some money for closing/settlement costs, moving expenses, furniture etc. My parents are also willing to cosign the loan, but obviously I would rather not have to make them do that if at all possible.

Any advice would be appreciated!
posted by elisabeth r to Work & Money (11 answers total)
Your employer might be required to tell the mortgage company about your employment status, independent of anything you tell them.

When my husband and I were refinancing our house a few years ago, I was called into my boss's office and told that they'd received an employment verification and income request from the mortgage company, but she couldn't fill it out in good conscience fill it out because they were planning on laying me off at the end of that month.

(FYI - I am in NYS. Your state's mileage may vary.)
posted by Lucinda at 6:57 AM on March 31, 2006

Yes- I forgot to mention- I'm in Pennsylvania.
posted by elisabeth r at 7:07 AM on March 31, 2006

Why are you looking for trouble?

Fill out all paperwork in good faith. If you were asked, today, "are you employed?", the answer is no. If you were asked, last week, "are you employed?", the answer is yes. No information is ever truly up-to-date - when you walk away from the bathroom scale, you no longer weigh *exactly* what the scale said you did. That's okay. The banks understand the risk of information being out of date. Truly, it's minor - you could have been fired the day after the mortgage papers are signed. The bank doesn't care about any particular job, they care about the income potential that you demonstrate by holding the job.

Some little kids have the same problem. They ask Mom, "can I have a cookie?" Mom says yes. Then they go ask Dad if it's okay that they have a cookie! Know when to take your answer and go!

You remain confident of your ability to pay off the mortgage as required. If the bank convinces themselves of the same thing, why are you so anxious to throw a monkey wrench in the deal?
posted by jellicle at 7:09 AM on March 31, 2006

I'm in a similar situation. My boss refuses to fill out any sort of employment verification "because I'm not an employee, but a contract worker". I had a loan ready to go, but without out that verification, the loan (and the 300 bucks I'd paid to get the ball rolling) are now in the toilet. Don't tell the loan officer anythign more than what he asks.
posted by notsnot at 7:21 AM on March 31, 2006

If you already completed the mortgage application, submitted paystubs and all that, I'd let it ride. I had the same thing happen last year in the middle of a refinance, except I got no severance as the company was shutting down. I didn't have any problems.
posted by COD at 7:23 AM on March 31, 2006

If the company is large enough to have an HR department they may be limited by law what they can say to an inquiry. FWIW I was in the exact same situation- still being paid, but technically laid off- and doing a refi. The HR people informed me that all they could say when asked was that I was 'currently on the payroll'.
posted by Gungho at 7:59 AM on March 31, 2006

When I bought my house five years ago, the bank re-verified my employment status about 3 hours before closing.

Presumably, if when they called my employer, they found that I no longer had a steady source of income, they would not have allowed the closing to proceed.

Your bank might do the same, and you might want to be prepared for what you'll do if that happens.

Personally, I would be up-front with the mortgage broker and tell them what's going on. If it kills the purchase of the house, so be it - there are other houses. Of course, this assumes that you had a financing contingency clause in your offer, and you won't lose your earnest money deposit.
posted by deadmessenger at 8:42 AM on March 31, 2006

Technically, if you're 'on notice' you're still employed. I'd talk to your companies HR department and see if they would still verify employment.
posted by delmoi at 8:47 AM on March 31, 2006

I was a Mortgage loan Officer for 7 years. If your loan as already been submitted and approved, and you have a closing date you should be fine. The only thing that can trip you up is if they havent done a verification of employment (VOE) yet... which depending on how busy your mortgage company is can be the last thing to be done, or in the very beginning... there also is the possibility that the VOE can be done just prior to closing as part of an internal audit, or spot check if you will, but this is highly unlikely.

Depending on your relationship with your LO, you may want to talk to him about it so that you can create a plan B if there is a problem with your VOE at the last minute. You dont want to put yourself in a pickle the day before or of closing and potentially lose any deposit money you've put down.

Another idea may be to call a seperate mortgage company, ask them to give you a pre approval **WITHOUT RUNNING YOUR CREDIT REPORT** and that WOULD NOT include a VOE... that will at least give you the terms and conditions of the new loan, and give you an idea how much higher the rate would be as a result of not doing a VOE.

If your credit score is in the 700's (very good), it may be possible that you can get a loan very close in terms and rates to a loan when they do a VOE.
posted by Cohiba4009 at 8:51 AM on March 31, 2006

There are "no verification" mortgages. I've always qualified for these in the past, and the mortgage people offered them. I'm not sure how they rationalize them, but basically it means that they don't verify your employment. I think this is based on past credit history. If you get one of these, you shouldn't have a problem.
posted by alms at 9:19 AM on March 31, 2006

Hey, guess what? Your mortgage broker really wants to close this loan also *cough*commission*cough*. I highly doubt that he/she is going to go out of his/her way to scuttle the deal. That may explain why they're sticking their fingers in their ears when you try to explain the job thing.

If you've previously done the VOE before getting fired, then let this ship sail peacefully to its desired destination.

Make sure you pay all those mortgage payments on time later though!
posted by de void at 11:26 AM on March 31, 2006

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