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If you’ve been furloughed, you may be wondering what that means for your plans to buy or refinance a home. Here’s what you need to know about being furloughed as a would-be homebuyer or refinance candidate.
A job represents many things: security, pride, worth, and contribution, to name a few. A job also makes a mortgage applicant less of a risk, as it generates consistent income. Yet during times of economic or employment uncertainty, your employment status may have a negative impact on your ability to secure mortgage financing.
More specifically, for those furloughed, uncertainty taints their lives. When will they be called back? Will they make the same amount of money? Will the employer even remain in business? These unknowns breed frustration, especially as interest rates fall. People wonder: “Can I get a mortgage while I’m furloughed?”
What is furloughed, what does this mean? Am I being laid off?
Yes and no. A layoff is in fact a termination, you are being fired, but for no fault of your own. The company can no longer afford to compensate you so it must eliminate your job or consolidate it with another. Like a layoff, a furlough occurs when the employer is unable to pay employees.
Unlike a layoff, a furlough is, at least in expectation, a temporary situation. The employee is not terminated but, instead, directed to stay home until conditions improve.
Ordinarily, furloughed workers are not paid, though they might continue to receive benefits. Sometimes, furloughed employees are given provisional dates for when they can return.
Washington follows federal FLSA rules and adds its own wage protections, including timely payment and record keeping requirements. Employers must clearly define the furlough period and ensure compliance with state minimum wage laws. Exempt employees must not perform any work during furloughs, and benefits continuation depends on the employer’s plan and policy.
Employers in Oregon may designate furlough leave without pay, but it must comply with wage and hour laws. Furloughed employees typically retain eligibility for health benefits, including medical and dental coverage, if the employer chooses to maintain them. Exempt employees must not perform any work during a furlough week to avoid triggering full salary obligations under federal law.
Idaho follows federal Fair Labor Standards Act (FLSA) guidelines, with no additional state-specific furlough laws. Employers can furlough employees as long as minimum wage and overtime rules are respected for non-exempt staff. Exempt employees must be paid their full weekly salary if they perform any work during a furlough period.
Colorado requires employers to follow both federal FLSA and state wage laws when implementing furloughs. Employers must ensure that non-exempt employees are paid for all hours worked, and exempt employees must not work during furlough weeks to avoid full salary obligations. The state also emphasizes clear communication and documentation when reducing hours or pay.
California has strict wage and hour laws that apply during furloughs, including rules around final pay if a furlough is indefinite. Employers must ensure that exempt employees do not perform any work during furlough weeks, or they must be paid in full. California also requires prompt payment of wages if a furlough turns into a termination, and furloughed employees may qualify for unemployment benefits.
Lenders generally view furloughs as a temporary disruption in income, which can raise concerns during mortgage applications or renewals. If you’re currently furloughed, lenders may hesitate to approve new credit or may require additional documentation to verify your return-to-work status and future income stability.
However, if the furlough has ended and you’ve resumed regular employment, lenders typically treat it as a resolved issue, especially if your income and job security are back on track.
Other factors are at play, too. Two-income households may survive an application review if the furloughed partner receives the lesser compensation. In addition, if an employer publicly announces a return or re-opening date publicly, that can reassure nervous lenders, as long as the reactivation is not too far into the future.
While there are no hard and fast rules governing applications by employees placed on temporary leave, you can get some clues from the large mortgage investors like Fannie Mae. Since these organizations purchase so many mortgages each year, their standards are reflected in lender credit guidelines.
Most mortgage lenders will seek compliance with these guidelines, though this does not guarantee acceptance.
Navigating a mortgage while on furlough can be challenging, but it’s not impossible with the right strategy and documentation. Whether you’re looking to buy a home or refinance, lenders will want reassurance about your income stability and return-to-work prospects.
Take these steps to boost your odds of loan approval while on furlough:
Talk to a mortgage representative to find out what sort of leeway lenders are allowing with regard to furloughed applicants. You may discover other options that get you that approval even when a job furlough ensues.
What does “furloughed” mean in mortgage terms?
Furloughed means you’re temporarily not working but still employed. Lenders view this as a pause in income, which affects your ability to qualify for a mortgage or refinance.
Can I refinance my mortgage while furloughed?
Refinancing is difficult during furlough unless you have a co-borrower with stable income or significant assets. Most lenders want current employment and income verification.
Do I need to be back at work before applying for a mortgage?
In most cases, yes. Lenders typically require recent pay stubs or direct deposit records to confirm active employment.
What if I have a co-borrower who is still working?
A co-borrower with reliable income can strengthen your application and may allow you to qualify even while furloughed.
Will my credit score be affected by furlough?
Furlough itself doesn’t impact your credit score, but missed payments or increased debt during this time can lower it.
Can I use savings or assets to qualify for a mortgage while furloughed?
Yes, some lenders may consider substantial savings, investments, or retirement accounts as compensating factors, especially for asset-based loans.
Should I wait until I’m back at work to apply for a mortgage?
If possible, yes. Waiting until you’re actively employed improves your chances of approval and may lead to better loan terms.
Can I get pre-approved while furloughed?
You may be able to get pre-approved based on your employment history and expected return, but final approval will likely require proof of resumed income.
Will lenders verify my employment status during underwriting?
Yes. Lenders contact employers directly to confirm current status, and furloughs are typically flagged as a pause in income.
Can I qualify for a mortgage with rental income while furloughed?
If you have documented rental income from investment properties, it may help offset your furloughed status, but lenders will still assess overall risk.
What documents do I need if I’m furloughed but returning soon?
You’ll need a signed letter from your employer with a confirmed return date, recent pay stubs (if available), and possibly bank statements showing reserves.
Will furlough affect my debt-to-income ratio?
Yes. Without active income, your debt-to-income ratio increases, which can disqualify you from certain loan programs.
What’s the best strategy if I’m furloughed and want to buy or refinance?
Focus on maintaining your credit, saving cash reserves, and gathering documentation. Once you’re back at work, revisit your options with a mortgage lender.
Sammamish Mortgage has been helping people in the Pacific Northwest achieve their dreams since 1992. If you are looking for financing for a home, we can help. Sammamish offers mortgage programs in Colorado, Idaho, Oregon, Washington, and California. Feel free to Contact us if you have any mortgage-related questions. Also, you can View Rates on our site or simply Apply Instantly. You can also easily get a Rate Quote instantly.
Whether you’re buying a home or ready to refinance, our professionals can help.
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