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I unexpectedly lost my job a week away from closing on a condominium with a mortgage.

I wasn't worried… until I realized that the mortgage is conditional on my creditworthiness remaining the same. From asking around, it sounds like no bank will lend to someone without a job, even if they have a history of being employed and enough savings to make mortgage payments for years (which I do).

I've put in a 10% deposit. I'm currently going over my options. Here's what I have so far:

  • Talk to my old employer and ask to stay on payroll until after closing.
    Spoke to the bank, they won't lend if I know that the job isn't permanent.

  • Get a new job right away.
    This bank (Chase) won't lend unless I've been employed for 30 days, but a different bank (Citizen's) would lend if I have an engagement letter from a new company. I'm not a fan of this option, since I wanted to take time off before jumping into a new full-time job — which my savings would've made possible.

  • Try to back out of the sale.
    My attorney thinks that I might be able to back out of the sale and recover my deposit on a technicality. I would prefer not to do this, because it would suck for everyone involved and I like the apartment, but right now it's the leading option.

  • Try to pay cash, mortgage later.
    I have just barely enough cash and stocks to pay for the apartment outright. I might be able to borrow money from family to cover living expenses until I get a job and mortgage the house. This lets the sale go ahead, and eventually things should end up as they would've been if I closed normally. But, this feels highly risky. Should it?

Did I miss anything? What's the smart decision here?

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    Out of curiosity, how would they have known that you lost your job with only a week till closing? All approvals should be done already right? – JPhi1618 Nov 19 '15 at 19:18
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    Is it possible I could've slipped it by them? Maybe. The application requires me to inform them of changes in my financial situation, and says that at closing I'll have to sign another form confirming that no changes have occurred. I've also heard that banks tend to re-check employment on the day of closing, so even if I were willing to commit bank fraud here, they might catch me. – s4y Nov 19 '15 at 19:22
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    ("Changes in my financial situation" are my words — the paperwork specifically mentions employment.) – s4y Nov 19 '15 at 19:24
  • Ah, of course. I guess in that case, you most likely could have gotten away with it, but been in some serious trouble if you did have problems paying. I forgot about all the questions they put in the final paperwork. – JPhi1618 Nov 19 '15 at 19:32
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    Unless you had a terrible attorney or real estate agent, your offer ought to have been made conditional on getting the mortgage, so it's far more than a technicality, but a condition the seller would have seen with two eyes. They had every right to hold out for a cash offer and didn't. If you had put down any earnest money, that is likely to be forfeit under option 3. 5th-6th option: negotiate with the seller to extend the closing date; negotiate with the seller to do a lease to sale (that is, you rent the property for the carrying cost until you have the new job) – user662852 Nov 19 '15 at 21:11
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The thing with your last option is that the cash-out mortgage is treated differently than purchase mortgage, with regards to taxes. Specifically, tax deduction is limited to $100K mortgage instead of $1M (or a bit higher even).

Other than that - you've covered your options, and its up to you to decide what to do.

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For posterity, here's what happened:

Short version

  1. A family member offered to co-sign.
  2. We found a different bank which offered a (smaller) mortgage.
  3. We did that. I later refinanced to free the family member.

Long version

  1. A family member offered to co-sign for a mortgage, if it would help.
  2. The original bank (Chase) said that their underwriters would require me to be employed and couldn't provide a mortgage in this situation.
  3. The family member talked to another bank (Wells Fargo) with whom they already had a mortgage, and was told that they could provide a mortgage, but it would be smaller than the original. (I'd be happy to provide the broker's contact info to anyone, off-board.)
  4. We decided to go with this plan. I sold some stocks.
  5. At closing, we saw that the mortgage listed me a non-occupant borrower (which apparently allowed my assets to be considered and not my income). This wording spooked me, but after re-reading the non-occupant borrower rider a few times, I felt comfortable that a non-occupant borrower could occupy the home, just wasn't required to. Signed, closed, moved in.
  6. After a much-needed 6-month break, I started a new job.
  7. After a while, I refinanced (no cash out) to get a slightly better rate and, more importantly, absolve my family member of their responsibility.
  8. I continue to live in the apartment and work at the new job. I think it worked out about as well as it could have.
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If you have a family member with sufficient funds to lend, you might consider writing a deed that gives them a percentage of ownership in the property in exchange for a loan, then you could later take a mortgage to pay back that loan and purchase that percentage of the property back.

If it was me, I would probably just pay cash and try to get a home equity line of credit for emergency funds once I started working again. All the money I would have paid into a mortgage, and perhaps more--I would invest to rebuild the investment account as quickly as possible.

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    Doubt he can get a HELOC without a job and on a new paid in cash house ;) – Ross Nov 19 '15 at 20:54
  • Yeah missed that part. mb. – Ross Nov 19 '15 at 21:53

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