What If I Am Fired Before the Loan Closes?

July 19, 1999, Reviewed July 17, 2009, February 2, 2011

"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.

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