Going from Two income to one in the middle of a refinance

vdinliJune 10, 2009

We are in the middle of refinancing our home-rate locked in, appraisal done, waiting for the commmitment letter from the bank. I just found out I will be laid off probably just after the scheduled closing in mid-july. DH makes the bulk of our money and as such our debt to income ratio(before taxes) for this refinance with just DH's income will be below 30%. At the time I signed the application form, I was not aware that my work situation will change this drastically.

My question is do I have to disclose about the change in job situation before closing? We will not have a problem making the payments-infact we are currently paying 600$ more! The day after we signed the rate lock the rates jumped up and now we are seeing nearly a 1% hike in rate. I am worried that making changes in the application will mean that we will lose the rate lock and cost us a lot of money!

Thank you for any advice


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The bank will verify employment, credit, etc. just before closing.

    Bookmark   June 10, 2009 at 12:53PM
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Every business, commercial, construction, & consumer loan I've ever closed has included a statement stating that the information contained within the application was accurate as of the day of closing. The actual forms used varied substantially depending on the type of loan; but somewhere in the pile of papers that I put in front of borrowers was that statement...

Be aware that if requested to initial and/or sign your application's accuracy at closing & you remain silent about your employment status...that is bank fraud. By including your income & having it verified by your lender...you are using that income to evidence your ability to service the debt.

It sounds like your income is not necessary to qualify for the re-finance. However, bank fraud is bank fraud & never a good thing.

How far along is your underwriting? You mentioned a mid-July closing. That's still a long ways off. When does your lock expire? If loss of your income really doesn't negatively impact your ratios...your lender should be able to make the adjustments long before a mid-July closing. And, you'll sleep much better knowing you were up front & honest in the information you provided to the lender & that they are, in turn, relying on.

It's a bit trickier if you're still actually working on the day you close the re-finance. But, since you've had 'material notice' of the lay-off well in advance of closing the loan...your application is less than 100% truthful. You'll have to decide if you can live with that decision.

Hmmm, I just thought about something. My DH is head of all leading at a large regional financial institution. He mentioned to me a few weeks ago (back during all the news hype over escalating layoffs) that they were asking employers when they called for employment verification whether any layoffs were planned at the company. DH said that some companies provided the information & others refused. But, there might be 'some' chance your re-finance lender will find out about your layoff directly from your employer. I have no idea how large that chance might be?

Sorry about the loss of your job but glad to hear you'll be OK on just your DH's income.


    Bookmark   June 10, 2009 at 1:27PM
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Hi! thanks for answering, tricia and terriks. I guess my question was not worded correctly. I was not suggesting I would lie on the application or say that I am employed when I am not. Thanks for the warning on bank fraud. I was wondering if I disclose it now and they have to draw up a new application, will that affect the lock agreement and delay the whole process. Our lock expires right around the time of scheduled closing. I guess I will have to call the loan officer to find out!

    Bookmark   June 10, 2009 at 3:03PM
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