What to Do if You Lose Your Job After Buying a Home
You’ve just bought the home of your dreams. You moved in with excitement, ready to make this new space yours. However, a few weeks later, the worst possible thing happened. You lost your job.
Aside from the stress of being out your job, you’re probably wondering what comes next. How will you juggle your mortgage payments without a job to rely on? More importantly, do you have any options while you continue your job search?
If you’re not careful, you can enter mortgage default. This means you’ve failed to pay your mortgage on time several times, and now you’re facing foreclosure. The last thing you want to do is lose the home you’ve fought so hard for. Here are the steps you need to take if you were recently fired or let go from your job after you bought a home.
1. Check Your Insurance.
First, check your insurance. You might be surprised to learn that many insurance policies actually will cover your mortgage payments if you become unemployed. This might be covered in your mortgage insurance or your homeowner’s insurance, so check to see if this is an option for you.
Generally, this coverage will kick in within a period of time after buying your home. It’s usually within two years, and it will cover mortgage payments, taxes, and even home insurance payments. This is your first line of defense. However, if you don’t have unemployment coverage, move onto the next step.
2. Use Your Savings
This is exactly the type of situation an emergency fund is for. You should have some savings set aside in case you lose your job unexpectedly or you’re in some sort of tight financial spot. The first thing you’ll want to do is calculate your available savings and create a living situation budget. You’ll most likely need to scale back on expenses, but if you have a stable emergency fund you shouldn’t need to do anything drastic.
Remember to include your severance package and any unemployment benefits in this calculation. These benefits are essential at a time like this. If you don’t have any extensive emergency fund, plan to put aside at least 2-3 months of living expenses in the future to prevent this from happening again.
3. Talk to Your Mortgage Lender
Next, it’s time to talk to your mortgage lender. This can be scary for some people. It’s normal to feel like your mortgage lender will kick you to the curb, but they might be more forgiving than you think. While you might think you’re the only one to lose your job right after you buy a home, this is a relatively common situation. Your lender simply wants to get paid. They don’t want to go through a foreclosure process if it can be avoided. Many have systems in place to help with those who are experiencing a temporary financial problem like losing a job.
As soon as you think you can’t make your mortgage payment, talk to your lender. It’s key that you act fast. The earlier you take this step, the more options you’ll have. Many lenders will offer payment plans or other options to keep from defaulting on your mortgage. You might need to provide a hardship letter to your lender. This is a formal letter that describes your job-loss situation as well as a timeline for how and when you’ll be able to make payments.
4. Consider a Forbearance Program
A forbearance program is a temporary way to lower your mortgage payments or even suspend them altogether. While this might not always be available, the Home Affordable Unemployment Program is an example of one that can help while you’re actively searching for a new job.
There are other FHA-offered programs you might be eligible for. Talk to your lender about these options if you think they’re a good fit for your situation.
5. Make a Plan
Finally, create a plan for recovering financially. First on your list should be making a new budget that takes into account your new financial situation. Next, begin applying for jobs and reaching out to your local network to move this process along.
As long as you’re proactive with your search, you should find something that works for you. Don’t be afraid to consider a side hustle or part-time gig in the meantime. Recovering from losing your job can be difficult, but it doesn’t have to mean an end to your bank account.
If you lose your job right after you buy a home, don’t panic. You have more options than you think. Often, your lender is willing to work with you on a solution that doesn’t involve default or foreclosure. Take these steps above to keep your home safe.