Losing a job can create uncertainty around many parts of your finances, and if you have a mortgage, your home may be one of the first things you think about.
A change in employment does not automatically change the terms of an existing mortgage. But if the loss of income makes it difficult to keep up with your payments, there may be options to discuss with your mortgage servicer.
Understanding the difference between your mortgage itself and the assistance that may be available can help you know where to start.
Your Existing Mortgage Does Not Automatically Change
Losing your job does not, by itself, replace or modify the mortgage agreement you already have. Your loan continues according to its existing terms unless you and your mortgage servicer agree to a change or another applicable provision affects the loan.
The bigger concern is what happens if the change in income makes it difficult to make your mortgage payments.
A missed payment can lead to late fees, credit reporting, and eventually additional servicing or foreclosure-related steps. The exact timing and process can depend on your loan, servicer, applicable law, and other circumstances.
If you are concerned about making a payment, contact your mortgage servicer rather than relying on a general timeline. Your servicer is the company that handles your mortgage payments and account, and it can explain when a payment is considered late, what fees may apply, and whether assistance options are available.
Forbearance May Be Available in Some Situations
Forbearance is one type of assistance that may be available to borrowers experiencing financial hardship. Depending on the program and circumstances, a forbearance arrangement may temporarily reduce or pause required mortgage payments.
Forbearance does not eliminate the amounts owed. The terms, duration, and options for addressing payments after the forbearance period can vary.
If your servicer offers forbearance, ask what happens during the forbearance period, what you will owe afterward, and how the missed amounts will be handled. Your servicer can explain the specific terms before you agree to an assistance option.
Loan Modification May Be Another Option
A loan modification changes certain terms of an existing mortgage. Depending on the available program, it may be an option for some borrowers experiencing longer-term financial hardship.
Modification programs and eligibility requirements vary. A servicer may request financial information and documentation before determining whether an option is available.
A loan modification is also different from refinancing. A modification changes an existing loan, while refinancing involves applying and qualifying for a new mortgage that replaces the current one.
Your mortgage servicer can explain whether modification or other loss-mitigation options are available for your particular loan.
What About Refinancing After a Job Loss?
Refinancing requires a new mortgage application, and qualification is based on the new loan's requirements.
A change in employment or income can therefore affect whether refinancing is currently available. Income sources, employment circumstances, assets, credit, property information, and other factors may all be considered depending on the loan program.
If your employment recently changed, a loan officer can review your circumstances and explain which refinance options, if any, may be available. Avoid assuming that losing a job automatically makes refinancing either possible or impossible.
If you are considering a refinance for other reasons, understanding refinance closing costs can also help you better understand what goes into evaluating a new loan.
Selling a Home Is a Separate Decision
Some homeowners facing a long-term change in income may begin to consider whether they want or need to sell their home.
That is a larger financial and personal decision than simply determining what happens to your mortgage after a job loss. Your home’s value, mortgage balance, selling costs, housing needs, and other circumstances can all be relevant.
A real estate professional can provide information about the potential sale of a property, while your mortgage servicer can explain your existing loan and any assistance options available to you.
Understanding those different pieces can give you more information before deciding how to proceed.
Know Who to Contact
If job loss is making it difficult to keep up with your mortgage, your mortgage servicer can explain the assistance or loss-mitigation options available for your loan and what documentation may be required. Depending on the circumstances, those options could include forbearance, repayment arrangements, loan modification, or other programs.
If you are unsure who services your mortgage, your mortgage statement should include the company’s contact information.
For information about unemployment insurance programs, the U.S. Department of Labor provides links to state unemployment insurance resources.
If your employment has changed and you are considering a new mortgage or a refinance, a PMR loan officer can explain how your current income and employment circumstances may affect the mortgage options available to you. You can also learn more about how income can affect mortgage approval.
Disclaimer: This blog is for informational purposes only and should not be considered financial, legal, or credit advice. Loan programs, eligibility, and requirements vary. For guidance specific to your situation, consult an appropriate qualified professional. Equal Housing Opportunity.
Equal Housing Opportunity | PMR is not an affiliated or an agency of the federal government. All information contained herein is for informational purpose only and, while every effort has been made to ensure accuracy, no guarantee is expressed or implied. Any programs shown do not demonstrate all options or pricing structures, rates, terms, programs, and underwriting policies are subject to change without notice. This is not an offer to extend credit or a commitment to lend. All loans are subject to underwriting approval. Some products may not be available in all states and restrictions apply. AZ-BK #0937529; CA – Licensed by the Department of Financial Protection and Innovation, under the California Residential Mortgage Lending Act; WA-CL 1169. Additional disclaimers available at pmrloans.com/disclaimers
