Monday, August 31, 2020 / by Gary Semeniuk
In uncertain times, it can be easy to sit back and worry your time away hoping things will work out eventually. Although worrying will absolutely give you something to do, it won’t get you anywhere. So if you’ve been wanting to buy a home or refinance this year, don’t discount the possibility just because your income may have dropped. It’s true that qualifying for a mortgage is getting trickier for many potential borrowers, but you still have plenty of options and opportunities for a home loan.
How Have Things Changed?
Many industries are facing uncertain futures and what are likely to be unstable paths of recovery. Because of this, lenders have become increasingly concerned about borrowers’ abilities to repay loans. That’s not to say that there’s no hope in sight for workers or business owners, just that from a lender’s perspective, the pandemic has introduced an additional level of risk that has never been factored into home lending equations before now.
So it’s not that you’ve done anything wrong, or that home buyers in general have done anything wrong, but lenders like to see that incomes are stable and will continue to be stable for the foreseeable future. And in the current economic climate, this is pretty much impossible to forecast. Given this, lenders are getting more choosy about who they’ll lend to. Minimum credit scores are going up and, in some cases, so are down payments. The good news is that lenders are still issuing loans for home purchases and refinances, even to buyers who have lost income during the pandemic.
Getting a Loan With a Salary Drop
Revenues in many industries have taken a huge blow, and many workers are being asked to take a salary cut in order to maintain the integrity of the workforce. This doesn’t necessarily mean that you would be denied a loan, although you may need to provide additional documentation so your lender has a better picture of your overall financial picture. But a lower income can still affect your loan in one or more ways: