Can You Refinance After a Job Loss?
You've just lost your job. Money is tight. It would help if you could refinance your mortgage to take advantage of lower interest rates. This would lower your monthly payments and make it easier to pay your bills. The challenge lies in finding mortgage lenders that will work with you even though you've lost a steady source of income. Finding these lenders will take a significant amount of effort on your part.
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Searching for the Right Lender
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The good news is you don't have to refinance with the mortgage lender currently servicing your loan. In fact, you don't even have to refinance with a lender based in your home state. You can refinance your mortgage with any lender licensed to do business in your state. This gives you plenty of options. You'll need them if you hope to find a mortgage lender who will work with you if you've lost your job. Be prepared to make several phone calls to lenders, or to send email messages to just as many, to find one willing to consider your application.
What Lenders Want
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Mortgage lenders want to work with borrowers who can make their mortgage payments on time. They don't want to work with borrowers at risk of defaulting on their loans. Lenders consider a wide range of factors when deciding which refinance applications to approve and which ones to reject. Factors include your three-digit credit score, gross monthly income, monthly debt obligations and job history. Losing your job will, in lenders' eyes, hurt both your gross monthly income and job history status.
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Making your Financial Case
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To encourage lenders to work with you even though you have lost your job, you'll have to make a convincing case that you still have the financial wherewithal to pay your mortgage bill on time each month. You may have a significant amount of money in savings that you can use. If that money is enough to get you through a year or more of mortgage payments, some lenders may be willing to work with you on a refinance. Perhaps your spouse works, and even with your job loss, your household still has enough income to cover your mortgage bills. Maybe you work several freelance jobs on the side, and that, combined with your unemployment benefits, will help you pay your mortgage on time until you find a new full-time job.
Documents to Support Your Case
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You will need to support your argument by backing up your claims with the right paperwork. If you say that your savings are enough to get you through a year or more without a full-time job, you'll have to send your lender copies of your bank savings account balance and your investment accounts. If your spouse alone makes enough income to cover your mortgage bill, you'll have to send in copies of your spouse's most recent paychecks. Your lender will tell you exactly what paperwork it needs.
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