quitting job during underwriting?

[solon]

We found a house we like, made an offer, and it was accepted! During underwriting they put us through the wringer. The verified our jobs, income, previous years taxes, etc. We were approved for the mortgage.

A week later I quit my job.

The close is coming up. So my question is, will they be doing another employment verification? Do I need to disclose that I don't have that job any more?

[mistymoney]

they might!


What is your last payday vs closing date?

I think I had to bring my lastest pay stub to closing, but I can't remember if they asked if I was still employed there or not. This is 10+ years ago.

[Gremlin]

We're not in the US, but I do know that we had to notify our lender if there were 'any material changes' to any of the verified info between loan approval and settlement date.  YMMV.

[reeshau]

I presume you are quitting with FU money?  Do you have another job lined up?

It could provide complications, but having proof of your assets could be good to have handy, as a backup.

It is a typical provision in US mortgages that you need to notify the lender of any changes in your income.  Credit cards, too.  And, AFAIK it is almost universally ignored.  At least, I haven't heard any part of job change war stories that ever began: "and then we told our lender, and..."

[chasesfish]

It depends on the company / processor.

They are supposed to verify employment at closing and you are required to report any "material adverse changes" to your financial position.

You can either tell them and let the deal be re-underwritten on one income, or you can stay quiet and see what happens.  You risk defaulting your purchase contract if you can't close absent financing.

[Dicey]

What's the date of your last paycheck? Does it look like the first one you submitted? If it doesn't say "Final" or similar, and it's recent, I'd be sorely tempted to submit it and keep my lip zipped. That's assuming you can afford the house without a job. Good luck!

[ender]

I would be surprised if you do not have to either 1) lie during closing or 2) disclose this.

I'm fairly sure that when we signed our mortgages/refinances I signed something to the effect of no material changes happening.

Whether this matters to you or not? meh.

[RobertFromTX]

Couple of issues.

1. You are going to sign documents at closing that basically re-certifies what you submitted with your initial application. If you certify that you are employed and the lender is relying on this income to qualify your repayment ability, but in fact you are no longer employed, that is mortgage fraud.
2. We had a general practice of calling and verifying employment the day before closing. This was in addition to a previously obtained written verification of employment. You risk absolutely wrecking the deal.
3. You should probably disclose it and let them re-do the application. This might delay closing by a few days, but no big deal.

[GilesMM]

Read the loan docs you already signed and then read those which will be presented at closing (and reviewed by you several days in advance). I have not seen a clause which required you to notify them of a change so I don't think you will see one.  Nor have I ever been asked at a closing about this so I think the risk is low.


If you do disclose you quit your job, the loan will be denied and you will have to re-apply with new terms and it may not be approved.  This recycle could put you in jeopardy with the seller who could cancel the sale and hold your deposit or even sue for damages, depending on how your contract is written.


Why did you quit at this moment and not wait until closing?  You may have put yourself in legal jeopardy.

[iluvzbeach]

I have always known the lender to re-verify employment just prior to providing final approval to close and I would imagine this has become even more strict with so many tech layoffs happening over the past 12-18 months.

I’d be certain you can qualify to close on only one income (if there’s a joint borrower) or be prepared to pay in cash if you can afford to do so. Otherwise, there is a strong likelihood this deal could fall through.

[solon]

Hm, we seem pretty evenly divided between nothing to worry about, and trouble coming.

Are any of you professional underwriters? Or do you know a professional underwriter you could ask?

For those who asked, my wife works, and her income is enough to pay all our expenses. We don't have enough to do much else though, so I am actively looking for work, not retiring. We have FU money, and I didn't want to stick around in a job I knew I wouldn't like. (I had just started this job, so quitting was a result of starting and discovering it wasn't for me.) I know I'll have a new position soon and this temporary cut in income isn't a problem for paying the mortgage, it's just that between now and the closing our income is down and I don't know if the lender would like that.

I could be putting the sale at risk, but I could also be putting it at risk by disclosing. I'm just trying to figure out which is the greater risk.

[iluvzbeach]

I am FIREd but this was my line of business. While I was not an underwriter, I am quite knowledgeable about the process.

If you do not disclose the change in employment status, you risk blowing up the whole deal. If you disclose and can’t formally qualify on one person’s income, you risk blowing up the deal. The lender wants strong assurance they will be paid back for the mortgage & the promise of getting a job generally doesn’t make them feel this is a risk worth taking. I know this doesn’t help much but you would have been much better off to submit your resignation the day following closing.

[Sandi_k]

My sister was an escrow officer for two decades, my mom was a loan officer, and I worked in title. I currently run HR for a unit, and income verification is common. If your lender has a policy of employment verification - and most do - then you're in trouble.

What is your debt-to-income ratio on just your wife's income? The classic ratios are no more than 28% of gross pay on PITI/HOA, and no more than 34% committed to all debt, including car loans or student loans.

If your DTI ratios are higher than that, with just your wife's income, I would expect that your lender will not fund the loan.

[reeshau]

To the point of the last two posts:  better they find out from you, than your former employer.  Its the Prisoner's Dilemma, at least for you.

If they find out from you, but weren't going to do it: then you are honest.  It might blow up the deal.  They might give you some extra time to close (i.e. to find a job) or not.  You might qualify on your wife's salary.

If they are going to check:  Your employer says: "no, they quit."  You look dishonest, and it was voluntary.  Deal is toast.

You might not need to pay cash, but could you put down a bigger down payment, that would make your wife's salary comfortably cover your expenses?  That might drain your FU money, but with a smaller mortgage payment, you could replenish it more quickly when you do find a new gig.

[Sandi_k]

@reeshau - there is a third option, although it's not, IMO, ethical.

Ask the person at the old company to not respond to the employment verification. Or, if there is a terminal check still coming, ask them to elide the situation, and say that they are still on paid status (or some such wording that isn't a lie about employment continuing, but still getting paid).

I do know folks who have done that, and the former HR officers have been willing to do so.

[iluvzbeach]

The other option, if it’s not too late, is to rescind your resignation and then resign again following closing. Just be 100% certain you’ll be able to afford this new place while not employed. The only thing more stressful than a slow job search during the holiday season is worry about losing your home to foreclosure. Well, poor health of yourself or a loved one could be more stressful, but this scenario is certainly near the top of the list.

[solon]

The lender has already verified my employment and income, I was employed at the time, and they have approved the loan. What I'm wondering is, will they check again? How likely are they to find out I no longer work there?

[seattlecyclone]

The lender has already verified my employment and income, I was employed at the time, and they have approved the loan. What I'm wondering is, will they check again? How likely are they to find out I no longer work there?

Given there's a few posts above mentioning that some people do re-verify employment right before closing, I'd say the answer to your question is "likely enough that you don't want to risk it."

[iluvzbeach]

The lender has already verified my employment and income, I was employed at the time, and they have approved the loan. What I'm wondering is, will they check again? How likely are they to find out I no longer work there?

Solon, we have answered your question. You may have received “conditional approval” but “final approval” won’t be provided until right before closing and this usually always involves last minute verification that your employment status hasn’t changed. Do nothing if you want, but don’t be shocked or surprised if everything blows up right before closing. Haven’t you always heard to never apply for a new credit line for new appliances or finance a new car while you’re going through the mortgage process because it can fuck things up? This is like that, but worse. Much worse.

[Morning Glory]

The lender has already verified my employment and income, I was employed at the time, and they have approved the loan. What I'm wondering is, will they check again? How likely are they to find out I no longer work there?

Solon, we have answered your question. You may have received “conditional approval” but “final approval” won’t be provided until right before closing and this usually always involves last minute verification that your employment status hasn’t changed. Do nothing if you want, but don’t be shocked or surprised if everything blows up right before closing. Haven’t you always heard to never apply for a new credit line for new appliances or finance a new car while you’re going through the mortgage process because it can fuck things up? This is like that, but worse. Much worse.

I agree. I had to once send a special letter at the last minute explaining why income was just slightly less than the month before. It was still way more than we needed to qualify but they had to cross every t for compliance or whatever.

[reeshau]

The lender has already verified my employment and income, I was employed at the time, and they have approved the loan. What I'm wondering is, will they check again? How likely are they to find out I no longer work there?

Solon, we have answered your question. You may have received “conditional approval” but “final approval” won’t be provided until right before closing and this usually always involves last minute verification that your employment status hasn’t changed. Do nothing if you want, but don’t be shocked or surprised if everything blows up right before closing. Haven’t you always heard to never apply for a new credit line for new appliances or finance a new car while you’re going through the mortgage process because it can fuck things up? This is like that, but worse. Much worse.

I agree. I had to once send a special letter at the last minute explaining why income was just slightly less than the month before. It was still way more than we needed to qualify but they had to cross every t for compliance or whatever.

If the mortgage doesn't comply with industry standards, the bank won't be able to package it and resell it.  They don't want to (have to) be stuck with it.

[chasesfish]

Summary of this thread:

Ask advice

Don't like advice

Argue with said advice

[slappy]

The lender has already verified my employment and income, I was employed at the time, and they have approved the loan. What I'm wondering is, will they check again? How likely are they to find out I no longer work there?

Yes, they typically do the day before closing. What prompted you to quit your job now instead of waiting for the loan to close?

[patchyfacialhair]

Posting to follow. I'm just nosy.

[Sibley]

Summary of this thread:

Ask advice

Don't like advice

Argue with said advice

You missed a couple steps:

Do something optional that has a good chance of screwing up the mortgage process.

Panic and start to worry that you just screwed up the mortgage process.


Basically, solon, I am very surprised that you did something that is objectively pretty stupid. You should know better. OF COURSE quitting your job in the middle of a house closing may cause problems with the close. Committing fraud isn't going to help your situation, so don't do that.

[Duke03]

Honestly if the closing is within 30 days of getting the green light you will be fine.  I mean you'll still have to sign a document stating that nothing has changed in your employment history which will be dishonest....but plenty of Americans have committed worst mortgage fraud than this. 

[slappy]

Honestly if the closing is within 30 days of getting the green light you will be fine.  I mean you'll still have to sign a document stating that nothing has changed in your employment history which will be dishonest....but plenty of Americans have committed worst mortgage fraud than this.

This is not correct, though. The mortgage company is going to verify his employment before they close the loan. For exactly this reason.

[wageslave23]

Now the question is, do you qualify on your wife's salary alone? If so, then tell the lender and get it re approved asap. If you don't qualify, then let it ride. If they don't re-verify then you got lucky and you're good to go. They aren't going to verify your employment after closing and say wait you should have told us. If they verify your employment and you don't qualify solely on your wife's income, then you aren't getting the house either way.

[HPstache]

Just strictly out of curiosity, why did you quit your job at this inopportune time?

[Silrossi46]

Just strictly out of curiosity, why did you quit your job at this inopportune time?

This

[Drink Coffee And Stack Money]

The lender has already verified my employment and income, I was employed at the time, and they have approved the loan. What I'm wondering is, will they check again? How likely are they to find out I no longer work there?

FWIW,

We had a house built in 2020/2021 (build time was 10 months). We went in with both credit scores being 796/805, zero debt, and 10% down. Even with that our lender and realtor told us at least monthly not to change anything between signing the contract to build and the day the loan was funded. Specifically not to quit or change jobs, not to pay any big debt off, or take on any new debt. Our realtor also told us numerous stories of clients getting down to a week or less before closing and then not being able to get funded because they quit a job, changed jobs, bought a boat, co-signed a loan for a family member, etc..
Our employment and complete financial records were checked when we started the process and again 1 or 2 days before the loan was funded.

[Morning Glory]

The lender has already verified my employment and income, I was employed at the time, and they have approved the loan. What I'm wondering is, will they check again? How likely are they to find out I no longer work there?

FWIW,

We had a house built in 2020/2021 (build time was 10 months). We went in with both credit scores being 796/805, zero debt, and 10% down. Even with that our lender and realtor told us at least monthly not to change anything between signing the contract to build and the day the loan was funded. Specifically not to quit or change jobs, not to pay any big debt off, or take on any new debt. Our realtor also told us numerous stories of clients getting down to a week or less before closing and then not being able to get funded because they quit a job, changed jobs, bought a boat, co-signed a loan for a family member, etc..
Our employment and complete financial records were checked when we started the process and again 1 or 2 days before the loan was funded.

Even moving money from one account to another can trigger requests for extra paperwork, since they need a paper trail of where the down-payment came from.

[use2betrix]

Honestly if the closing is within 30 days of getting the green light you will be fine.  I mean you'll still have to sign a document stating that nothing has changed in your employment history which will be dishonest....but plenty of Americans have committed worst mortgage fraud than this.

Mortgage company may not push it, but the seller might escalate. If a buyer knowingly quits his job and  doesn’t disclose it, and then signs a paper saying nothing changed, and the sale falls through because he/she lied, that’s wasted time that the house is off the market when they could be securing other buyers. Particularly as in several areas, prices are dropping.

All the requirements of job change, notification, and recertification of income should be somewhere in the mortgage paperwork.

[seattlecyclone]

Basically, solon, I am very surprised that you did something that is objectively pretty stupid. You should know better. OF COURSE quitting your job in the middle of a house closing may cause problems with the close. Committing fraud isn't going to help your situation, so don't do that.

For what it's worth I think it's objectively pretty silly that your income at the exact instant of closing is what our system cares about here. They're making a bet that you'll be able to pay the loan over the course of 30 years. Occasional job changes and periods of unemployment are par for the course over such a time period. Seems to me an average of the person's income over the past several years should be given more weight than "are they employed right now," but I'm not the one deciding these things.

[mistymoney]

Basically, solon, I am very surprised that you did something that is objectively pretty stupid. You should know better. OF COURSE quitting your job in the middle of a house closing may cause problems with the close. Committing fraud isn't going to help your situation, so don't do that.

For what it's worth I think it's objectively pretty silly that your income at the exact instant of closing is what our system cares about here. They're making a bet that you'll be able to pay the loan over the course of 30 years. Occasional job changes and periods of unemployment are par for the course over such a time period. Seems to me an average of the person's income over the past several years should be given more weight than "are they employed right now," but I'm not the one deciding these things.

I think you're assuming good intentions here. The worst case scenario is willful and deliberate fraud with the intention to milk as much free accommodation out of the foreclosure process as possible. I was very shocked when I found out a neighbor of ours did just that. Got more than 2 years worth of living with no rent or mortgage payment.

That is what the banks are trying to avoid.

[seattlecyclone]

Basically, solon, I am very surprised that you did something that is objectively pretty stupid. You should know better. OF COURSE quitting your job in the middle of a house closing may cause problems with the close. Committing fraud isn't going to help your situation, so don't do that.

For what it's worth I think it's objectively pretty silly that your income at the exact instant of closing is what our system cares about here. They're making a bet that you'll be able to pay the loan over the course of 30 years. Occasional job changes and periods of unemployment are par for the course over such a time period. Seems to me an average of the person's income over the past several years should be given more weight than "are they employed right now," but I'm not the one deciding these things.

I think you're assuming good intentions here. The worst case scenario is willful and deliberate fraud with the intention to milk as much free accommodation out of the foreclosure process as possible. I was very shocked when I found out a neighbor of ours did just that. Got more than 2 years worth of living with no rent or mortgage payment.

That is what the banks are trying to avoid.

Sure, and who's the bigger risk of this type of fraud: someone who spent most of the past five years unemployed but miraculously got a new job last month, or someone who's been employed most of their adult life and was laid off last week? I'd guess the former. Intentionally exploiting the length of the foreclosure process for short-term free housing at the expense of one's ability to find housing in the long term is not something someone will generally do if they have the ability to pay their loan.

[reeshau]

Basically, solon, I am very surprised that you did something that is objectively pretty stupid. You should know better. OF COURSE quitting your job in the middle of a house closing may cause problems with the close. Committing fraud isn't going to help your situation, so don't do that.

For what it's worth I think it's objectively pretty silly that your income at the exact instant of closing is what our system cares about here. They're making a bet that you'll be able to pay the loan over the course of 30 years. Occasional job changes and periods of unemployment are par for the course over such a time period. Seems to me an average of the person's income over the past several years should be given more weight than "are they employed right now," but I'm not the one deciding these things.

It's not just the last day, but both the initial check and the last day--so, two points in a row, to understand if you had an unusual bonus or commission on the initial check.  The credit score is the other piece of data, giving some credibility to a long-standing ability to pay your debts, to the extent current processes and the law allow to be checked, plus practicality of processing time.

It's light years from the NINJA loans back before 2008, which required none of that--you were sold whatever you said you could afford.  That was a train wreck from a mile away, that depended on rapid price appreciation to get the hapless homeowners out of their predicament.

The duration is also quite unusual in the world.  In Ireland, I could get a fixed rate from 2-5 years, then the mortgage became a floating rate.  (so, you have to refi to get your guaranteed, hopefully lower rate)  And--pre-payment penalty during the fixed period.  Yuck.

[mistymoney]

Basically, solon, I am very surprised that you did something that is objectively pretty stupid. You should know better. OF COURSE quitting your job in the middle of a house closing may cause problems with the close. Committing fraud isn't going to help your situation, so don't do that.

For what it's worth I think it's objectively pretty silly that your income at the exact instant of closing is what our system cares about here. They're making a bet that you'll be able to pay the loan over the course of 30 years. Occasional job changes and periods of unemployment are par for the course over such a time period. Seems to me an average of the person's income over the past several years should be given more weight than "are they employed right now," but I'm not the one deciding these things.

I think you're assuming good intentions here. The worst case scenario is willful and deliberate fraud with the intention to milk as much free accommodation out of the foreclosure process as possible. I was very shocked when I found out a neighbor of ours did just that. Got more than 2 years worth of living with no rent or mortgage payment.

That is what the banks are trying to avoid.

Sure, and who's the bigger risk of this type of fraud: someone who spent most of the past five years unemployed but miraculously got a new job last month, or someone who's been employed most of their adult life and was laid off last week? I'd guess the former. Intentionally exploiting the length of the foreclosure process for short-term free housing at the expense of one's ability to find housing in the long term is not something someone will generally do if they have the ability to pay their loan.

when I did my last housing purchase - you needed to show continuous employment for 2 years in the same line of work, preferrably with the same employer.

I'm not sure what you are arguing for here. the bank doesn't want to do anything but collect their payment on time for the next 30 years and they have a complex underwriting system that susposedly predicts the best bets for full repayment. Does it work? idk! But they are not looking to take chances, is all I was saying.

If OP can't qualify for the mortgage on his wife's salary only, this is going to be a tricky situation. OP quit his job right after having everything approved - I don't think they are going to like that. Maybe someone will forget to check something immediately before closing and the deal goes through.

[seattlecyclone]

I'm not sure what you are arguing for here. the bank doesn't want to do anything but collect their payment on time for the next 30 years and they have a complex underwriting system that susposedly predicts the best bets for full repayment. Does it work? idk! But they are not looking to take chances, is all I was saying.

Sure. Agreed 100% that the bank is mainly concerned with not losing money. What I'm arguing for is that if you have a solid employment history, losing your job during the few weeks between signing your purchase contract and closing on the deal should not actually be considered much of a signal that you'll be unlikely to repay the loan. The possibility that you'll experience some unemployment in the next 30 years should already be baked into their risk assessment here. The fact that it's happening right now instead of a year ago or a year from now is unfortunate but really doesn't seem like it should have a material difference in the odds of repaying the loan on schedule.

If OP can't qualify for the mortgage on his wife's salary only, this is going to be a tricky situation. OP quit his job right after having everything approved - I don't think they are going to like that. Maybe someone will forget to check something immediately before closing and the deal goes through.

Totally. Given the system we have where you're expected to not touch anything in your financial life soon before closing but you can go ahead and quit your job the week after closing and nobody can do anything about it, yeah this could very easily pose a problem for them. I'm just saying it's a bit of a silly system.

[GilesMM]

I'm not sure what you are arguing for here. the bank doesn't want to do anything but collect their payment on time for the next 30 years and they have a complex underwriting system that susposedly predicts the best bets for full repayment. Does it work? idk! But they are not looking to take chances, is all I was saying.

Sure. Agreed 100% that the bank is mainly concerned with not losing money. What I'm arguing for is that if you have a solid employment history, losing your job during the few weeks between signing your purchase contract and closing on the deal should not actually be considered much of a signal that you'll be unlikely to repay the loan. The possibility that you'll experience some unemployment in the next 30 years should already be baked into their risk assessment here. The fact that it's happening right now instead of a year ago or a year from now is unfortunate but really doesn't seem like it should have a material difference in the odds of repaying the loan on schedule.

...

If I am a banker I am pretty sure that people who become unemployed for any reason during the course of escrow belong in a different risk category.  I would certainly treat them differently.  If they can't hold onto a job during 30 days when they know they are under scrutiny, what are the long term odds?


Being unemployed during the course of 30 years (actually, the average loan doesn't run past something like 7 years) is not good for the lender and in some cases leads to foreclosure.  Any bank that sees that red flag up front would be wise to reconsider the loan.

[ATtiny85]

I'm not sure what you are arguing for here. the bank doesn't want to do anything but collect their payment on time for the next 30 years and they have a complex underwriting system that supposedly predicts the best bets for full repayment.

Close, but not quite in my experience, though in the end it still means reliance on that underwriting system. I assume what the bank actually wants is to make sure they can box up the mortgage and sell it off as soon as possible in most cases. I don’t see many “bankers” thinking out 30 years.

Hopefully solon has been working to get things redone properly. Nothing like adding stress to somewhat stressful thing.

[Omy]

Did your realtor AND loan officer forget to tell you not to change anything prior to closing?

As a former realtor, I have seen loans denied because of VOEs done just prior to closing.

If you somehow make it to closing, you will be signing a form that says your employment/credit situation is materially the same as at the time of loan application. Lying on this form is mortgage fraud.

In our residential contract if the buyer does anything voluntarily (like quitting their job or not locking in a rate) to cause the loan to be denied, the buyer is in default and will likely lose his deposit or be sued for damages.

Are you prepared to pay cash for the house? That's the only way to know for certain that you will get the house without committing mortgage fraud.

[Morning Glory]

It may not be too late to tell your bank manager about it and have them rewrite the loan with just your spouse's income.  Depending on the amount they may require a larger down payment but if his/her income is adequate it shouldn't scuttle the whole deal.

An alternative is to get an offer letter from another job quickly.  I have been approved before  with an offer letter and unemployed spouse however the closing couldn't happen until I had physically worked one day.

[solon]

So here's how it turned out. Based on feedback from this thread, I called the mortgage broker to give him the news. He informed me that we had initially qualified using only my wife's income, so me quitting my job was irrelevant. We're still good to close.

Nice.

I asked if there would be a final verification of her employment, and he informed me yes, they will verify again. We close in 12 days.

[reeshau]

The irony!

Had you been considering quitting when you sent in the paperwork?  Was this a conscious choice on your part, that you had forgotten, or something on their end that they do to prevent jams like this?

Thanks for confirming their practice, too.

[ATtiny85]

Thanks for updating us!

Now, please tell your wife not to quit in the next 12 days…

[solon]

The irony!

Had you been considering quitting when you sent in the paperwork?  Was this a conscious choice on your part, that you had forgotten, or something on their end that they do to prevent jams like this?

Thanks for confirming their practice, too.

He told me it's standard practice to stop underwriting when they have enough to support the loan. Any extra underwriting beyond that has no value. It was our luck they started with wife's income first, and they didn't need to proceed further.

[Zamboni]

Nice!

I hope you enjoy your new home soon!

[HPstache]

Curious minds still want to know why you quit during underwriting.  If you don't care to share, that's fine though.

[mistymoney]

congrats on your new home!