Before closing on a loan, mortgage companies verify employment. Also, during closing, borrowers sign a paper stating they've had no major financial changes since the original loan application. A job loss qualifies as a major financial change. Also, if you get a new job after losing your previous one, letting the mortgage company know the new job information allows it to do a new debt-to-income ratio, according to U.S. News and World Report.
Mortgage Lenders May Back Out
Sometimes mortgage lenders decide not to lend borrowers money after a significant job loss. This is the price borrowers pay for honesty. Without a job and track record of a regular paycheck, lenders fear a defaulted mortgage. Quickly finding a new job could make the news of a job loss much less damaging. If you have time before closing on the mortgage, waiting to tell the mortgage company until you find a new job could allow you to still buy the home.
Borrowers should tell mortgage companies about any and all job changes, including job loss. Losing a job, however, often means mortgage companies won't lend money. Although this breaks some hearts, buying a home without a job and regular income makes no financial sense.