jq26

Effect of a Layoff

Recommended Posts

My management just announced my department will be trimming 50%-75% of us effective 12/31/09. :( However, all is not lost. The severance package is quite generous. If trimmed, based on years of service and level, I'm anticipating being handed a check for $35k on the last day of this year and be provided healthcare insurance for my family for another 12 months. The company needs to downsize but they are trying to make it as painless as possible. My employer has less work and needs to contract substantially if they are to survive. The layoffs are inevitable and much needed.

So here is the million dollar question. I may volunteer for the severance because I am in the midst of a career change anyway and one of my coworkers will be spared (I will likely be leaving shortly anyway). Assume I collect unemployment for 1-3 months from January through March 2010 and then obtain a job paying the same or more than I made in 2009. Will this effect qualification for a mortgage? We're currently planning on moving in March 2010. It is hard to walk away from a $35k "bonus", but then again if it means that I cannot buy a home for a year or two, it may not be worth it.

I'm trying to put a positive spin on this and view it as an opportunity. Any thoughts?

Edited by jq26

Share this post


Link to post
Share on other sites

Yes it will affect your qualifications for a mortgage. Underwriters look for stable employment. And one of the triggers of unstable employment is a career path change. If you were laid off but stayed in the same field with less than a 60 day gap it wouldn't be a problem. But, changing your entire career path puts you in at the ground floor. Underwriters will probably want 2 years on the new job, in the new field, before they will approve a loan.

Share this post


Link to post
Share on other sites

I've been searching for conforming guidelines to that effect, but I cannot find anything. This could be a real damper. We're boxed into a home that is too small for an expanding family. And despite nine straight years of income increases by both of us and ownership of two homes, we'd be prevented from buying a home together even with a sizable down payment (we're shooting for 15-20%).

I hope that's not the case. :shock: We'd have to get creative I guess.

Share this post


Link to post
Share on other sites

Actually, JQ, you might not want to jump the gun too much.

A friend of mine got laid off about 2 years ago from an oil company while she was in the process of a career change to a health care profession.

Within 6 months of graduating and accepting a job (this would be about 8 months ago), she was able to purchase a new home with no real issues.

The "whys" of it were fairly simple:

She could prove that she had very stable employment and had been seeking a career change due to the failing nature of the oil business prior to the lay off.

She could prove good payment history on her other house.

The expected starting salary for her new position was much higher than the average salary cap that she would meet working in the old field. With that, it was no trouble to fund her.

Share this post


Link to post
Share on other sites

Thank you. I will have to call a broker to clarify. I would think that is a more common sense approach. This career change is voluntary and deliberate- the result of four years of study. I would hate to think we'd be penalized for it. ;)

The problem here- (1) don't want to buy before I am CERTAIN of income in 2010 and beyond and (2) wife won't be able to qualify on her own. This is going to be the long term joint purchase. We're ready now, just short down payment and clarity on my career. Both should come together early in 2010 (especially if I collect the "bonus" being offered). That's why a lender requiring an arbitrary "same industry" income showing would be so devastating. If I get a definitive answer, I'll post.

Edited by jq26

Share this post


Link to post
Share on other sites
.....I'm trying to put a positive spin on this and view it as an opportunity. Any thoughts?

Back in the 1990's I started my own company while I was still in college. It took off and was making a very nice income. I dropped out of school.

After the Trade center bombing here in New York - my business died, at the age of 40, $80k in credit card debt, six months behind on my house payment, and a credit score in the low 500's. Forced me to change careers, got into Financing (hence my name 2nd Time Around).

Today my wife and I have very little debt, just refinanced a few months ago into a 4.5% fixed rate, credit scores in the high 700's.

Getting laid off gives you an unsecured feeling about your future. I had this feeling a couple of years ago after the mortgage bank shut down I worked at for five years . Then started working for a mortgage broker, which closed it's doors a few months later. We all know what happened to the mortgage industry collapsing.

At the age of 45 started at a technical school to learn a new trade. Took Microsoft Computer Essentials and Computer Technician, then CISCO Discovery Networking 1,2,& 3 courses. It's amazing how many friends you have, when you know how to do something. People come up to you, how do you do that, can you help me do this, I need help with..., etc... After taking all these computer courses, I am sick of computers.

Last week I just met with a Dean at the college I went too in the 90's. They are giving me 12 credits for my technical school. I am going to work towards completing my Business Bachelors Degree. I just finished the "A" summer session, starting another class for the summer "B" session.

Spoke with my last instructor on my curriculum - he said there is a new degree that is being offered, which requires a few more courses for a Bachelor's in Business Law.

With my knowledge, experience, and education - I am planning positioning myself into high income occupation in the short term future.

Point - now you know my resume, realize other people are / have been/ and going to be in, the same situation you are in now. Think of using this time to learn a new trade by investing in your future......:)

My $00.02 cents .......Good Luck...:)

Share this post


Link to post
Share on other sites

This happened to me recently. I worked for the lending arm of Centex Homes last year. We were suppose to be bought by another company, the deal fell through and I ended up Volunteering during the first round of layoffs even though I could have survived for an extra 3 months.

I started my new job a few months later (October 2008) and as some of you know, I am closing on my new house next Thursday.

Changing jobs didn't affect me at all. Changing industries didn't effect me as I went from the Private to Public Sector. My lender said that it would only be harmful if I was doing a total "career" change.

Share this post


Link to post
Share on other sites

Also, I agree with 2ndTimeAround.

I am 30 and was laid off when I was 29 and it was honestly one of the best things that has happened to me. I wish that I would have gained the experiences I got from being laid off when I was in my early 20s.

You learn quite a bit when being laid off and looking for a job.

Share this post


Link to post
Share on other sites
it was honestly one of the best things that has happened to me.
That's how I am looking at this. The original plan was to find employment in the new field and then give a month's notice to this employer. Now I can finish out the year casually and interview when i need to. If I time this right, I can walk out of here with employment lined up for January 1st with a sizable lump sum check as a goodbye present. If that doesn't happen, I'll still walk out of year on Dec. 31st with the lump sum and I'm eligible for up to 15 months of $600 per week of unemployment to boot (it really is absurd). I don't plan on taking a dime from unemployment or spending a nickel of severance though unless I'm against the wall. My goal is to take the check, invest it, and start a new job from day one. The severance will go a long way towards a down payment for a new home or college for my son.

I was thinking that having a potential gap for, say a few weeks or a month would be a major issue for mortgage qualification. It never dawned on me that a career change could be a potential qualification killer. I've worked continuously since I was 11 years old without a gap in employment. The fact that I went from delivering newpapers to making pizzas to landscaping to sales rep to lab analyst to pharma QA management to lawyer (cross your fingers) shouldn't matter imo. My employment history is intact and I have tax returns to prove it. I'd be peeved if a lender snags a loan for such an arbitrary reason.

Share this post


Link to post
Share on other sites

If I recall correctly, you have been working on your degree for quite a while now and didn't you just recently graduate and take the bar exam too?

This is more of a planned career move with the bonus of a severance package from the 'old career'. Once you are in your new job/career it should be easy to show you have been working toward this path over the past X years and less of an underwriting issue than is typical for a career change.

Share this post


Link to post
Share on other sites
If I recall correctly, you have been working on your degree for quite a while now and didn't you just recently graduate and take the bar exam too?
You are correct. In a nutshell, if I jump on a grenade and volunteer for layoff I can save a coworker's job and get a decent size check on my way out. The downside is that it could lead to an employment gap (not necessarily though) and require an explanation to underwriters about total career change. I suppose under the right circumstances, it isn't a deal killer.

Thanks for your input!

Share this post


Link to post
Share on other sites

Wait...what kind of law are you looking to practice? Because, if you are looking to practice in a medical related field, that may not be an actual career change.

That would be more "continued education for a better position within the same knowledge base".

Share this post


Link to post
Share on other sites

Likely in tax or M&A. Although I have an interview with a big pharma legal department just to feel it out. Could be interesting.

We'll see. I'm so sick of corporate America at this point I feel like Kevin Spacey in American Beauty.

Share this post


Link to post
Share on other sites
Guest
This topic is now closed to further replies.