Construction Loan only, lost job, now what?

We just moved into our new home a few months ago and due to some completion issues have not yet obtained our permanent financing. Due to some very unfortunate circumstances my spouse recently lost her job. I am still employed but my salary is only 2/3 of what hers was, so I feel there now is no way we will be able to secure our final mortgage. So what are our options at this point? Sell for as much as we can? I feel that the home construction cost on the construction loan are probably more than the market will support at this time. This was not a huge concern to us as this was to be our forever home and figured the market would catch up again in the future. Any suggestions?

Edited: 06/26/2010 at 09:21AM

Jon Holdman

Real Estate Investor · Denver, Colorado

11859 posts
75547 Influence
15 Awards

Icon_minipost Aug 13 '09, 08:32 AM

What are your wife's prospects for getting a new job? If you were counting on both of your income to qualify for the perm loan, and now your's is only 40% of the total, its unlikely you'll get a new loan.

Do you have reserves that would allow you to ask for an extension on the construction loan? Would that give you time for you wife to get a new job?

Edited: 06/26/2010 at 09:21AM

Jon Holdman, Flying Phoenix LLC

Kurt W.

Homeowner · Wisconsin

3 posts
20 Influence

Icon_minipost Aug 13 '09, 09:08 AM

She is in the medical industry, so probably good that she can get "a" job, but not in the same role she had, so maybe a salary equal to mine or slightly above. She does hold a masters degree, so that may help as well. We are still in shock of the whole situation as it came out of the blue. The only reserves we had were what we were holding for down payment on the perm financing.

Edited: 06/26/2010 at 09:21AM

Jon Holdman

Real Estate Investor · Denver, Colorado

11859 posts
75547 Influence
15 Awards

Icon_minipost Aug 13 '09, 09:17 AM

If she stays unemployed, you're going to lose the house. So, she needs to get a new job ASAP.

If she gets a job with the same pay as yours, your total income will be 80% of what it was before. Is that enough to qualify for the permanent loan? I assume you've already been pre-approved for the perm loan and know the lender's DTI criteria.

Are you able to cover you monthly bills and the construction loan payments with what you're making? You sure don't want any late payments right now.

I'd take a more optimistic view. Don't assume she'll have to take a pay cut. I assume this was a result of some sort of company downsizing and not a for cause firing. If so, that's happening everywhere, and if there are jobs available and she's qualified, I'm sure she can find something.

Once she gets back to work and you get this house situation stabilized, get some savings. If it takes both of you to support the payments on this house, you need to have enough savings to carry you though any job loss.

Edited: 06/26/2010 at 09:21AM

Jon Holdman, Flying Phoenix LLC

Kurt W.

Homeowner · Wisconsin

3 posts
20 Influence

Icon_minipost Aug 13 '09, 06:32 PM

Unfortunately it was not a downsizing. Due to a few disputed decisions she will be fired without cause.

Edited: 06/26/2010 at 09:21AM by Kurt W.

Jon Holdman

Real Estate Investor · Denver, Colorado

11859 posts
75547 Influence
15 Awards

Icon_minipost Aug 13 '09, 11:31 PM

Well, that's going to make for some interesting job interviews. Perhaps she could work out an arrangement with her current employeer where she would resign and they would give a neutral reference rather than saying she was fired.

Nevertheless, if you need that income to qualify for the perm loan, she's going to have to find another job.

If that can't happen, you're going to have to sell it. Try to get the lender to accept a short sale where they take whatever the sale nets as full and final payment. It will ding your credit score just as bad as a foreclosure (as I understand the scoring process) but Fannie Mae will allow a new loan two years after a short sale where they require five years after a foreclosure.

Can you ask for help from friends or family to try to hang on until she gets a new job?

Edited: 06/26/2010 at 09:21AM

Jon Holdman, Flying Phoenix LLC

Adam Anderson

General Contractor · Dallas/Ft. Worth, Texas

103 posts
425 Influence
2 Awards

Icon_minipost Aug 17 '09, 10:14 AM

Originally posted by kandk920

The only reserves we had were what we were holding for down payment on the perm financing.

Originally posted by Jon Holdman

If that can't happen, you're going to have to sell it. Try to get the lender to accept a short sale where they take whatever the sale nets as full and final payment. It will ding your credit score just as bad as a foreclosure (as I understand the scoring process) but Fannie Mae will allow a new loan two years after a short sale where they require five years after a foreclosure.

Will a lender accept a short sale when they have money in the bank?

Edited: 06/26/2010 at 09:23AM

Jon Holdman

Real Estate Investor · Denver, Colorado

11859 posts
75547 Influence
15 Awards

Icon_minipost Aug 17 '09, 12:10 PM

Depends on the amount of the shortage and the cash on hand. Same for a foreclosure. If they think they can get money from you, they will try.

Edited: 06/26/2010 at 09:23AM

Jon Holdman, Flying Phoenix LLC