Being unemployed and not having a full-time job can hurt your chances of getting approved for a mortgage. That’s because two major deciding factors for lenders when reviewing a mortgage application are your income and job history.
Unfortunately, not everyone has those. Some individuals don’t have full-time jobs because they work for themselves as freelancers or small business owners. Others are between jobs or just received a job offer, so when they apply for a loan, they don’t have a job yet.
Can you get a mortgage without a job? Ultimately, yes, but it’s much harder to do. Most loans have job history and income requirements, but lenders may approve your loan if you can prove your ability to repay it another way. You can get a mortgage loan without a job, but you’ll need to satisfy your lender’s requirements. Remember, a job is only one source of income, so just because you don’t have one doesn’t mean you can’t repay your mortgage loan.
This article will discuss everything you need to know about how to get a mortgage loan without a job, potential challenges, and the types of home loans best suited for your particular situation.
Getting a home loan when you are unemployed may seem daunting, but it is possible with the right preparation and approach. As an independent mortgage broker, I’ve helped many clients successfully navigate the process of securing financing without steady employment income.
In this comprehensive guide, I’ll walk you through everything you need to know to improve your chances of qualifying for and obtaining a mortgage if you are currently jobless.
Overcoming the Main Obstacle: Proving Repayment Ability
The biggest hurdle to clear when seeking a home loan without a job is convincing the lender you can reliably make payments, Underwriters mainly assess two factors when reviewing applications
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Income – Typically from wages or self-employment, used to qualify for a certain loan amount based on debt-to-income ratios.
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Assets – Your reserves and other funds that indicate you can repay the loan
If you don’t have income from employment, you’ll need to demonstrate sufficient assets to cover the monthly mortgage and other obligations. Lenders also want to see assets will continue generating funds to pay the loan.
Here are some common ways borrowers can show repayment ability when applying for a mortgage without a job:
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Investment income – If you receive recurring income from dividends, interest, rental properties, etc., it may qualify if you can document a consistent 2-year history.
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Retirement/pension – Verifiable distributions from 401Ks, IRAs, annuities, and pension payments may help you meet qualification standards.
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Alimony/child support – With court ordered documentation of regular payments, these can supplement or replace wage income.
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Other taxable income – Disability, trust, royalty and some other payments may be considered.
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Cash reserves – Having 2-3 years of mortgage payments available post-closing can help overcome low income.
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Down payment – A larger down payment signals lower risk, enhancing loan eligibility.
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Co-signer – Adding someone with income/assets willing to be responsible for the payments.
Choosing the Right Loan Program
Conforming loans that follow standard Fannie Mae and Freddie Mac guidelines usually require 2 years of steady employment history. But some options are more flexible:
FHA loans – Allow 1 year of job history and have lower credit score requirements. Also may use projected income. Popular with first-time buyers.
VA loans – Offer lenient qualification guidelines for veterans, active duty, and surviving spouses. No minimum income history needed.
USDA loans – For properties in rural areas, these have generous income allowance and don’t mandate employment. Low down payments.
Portfolio loans – Programs held in a lender’s own portfolio instead of sold to investors give more leeway on income verification.
Alternative income loans – Specifically designed for self-employed, retirees, and others with non-wage earnings. Feature reduced documentation.
Asset depletion loans – Uses your assets rather than income to qualify, depleting reserves over loan’s term to make payments.
The right loan type for your situation will depend on factors like your credit score, assets, military service, and the property location.
Tips for Getting Approved
Beyond picking the appropriate mortgage program, there are some other tips that can boost your chances of getting a home loan without steady employment:
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Maintain excellent credit – Lenders view higher scores as less risky. Scores above 740 get the best rates/terms. Pay all bills on time.
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Lower your debt-to-income ratio – Keep credit card and other debts low compared to your income sources. Pay down balances.
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Grow your down payment – Putting down 20% or more gives you the best loan options if you don’t have income.
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Keep robust reserves – Having 18-24 months of mortgage payments post-closing helps alleviate lender concerns.
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Explain employment gaps – Be ready to provide a signed letter detailing the reasons you don’t have a job.
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Consider a co-signer – Adding someone with solid income/credit could be difference-maker.
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Work with a mortgage broker – They have access to a wider array of loan programs than banks. More options improves your chances.
Documents Needed
To verify assets and non-employment income sources, collecting the proper documentation is critical when applying for a home loan without a job:
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Bank/investment account statements – Provide 2-3 months of statements documenting assets and recurring income.
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Tax returns – Include returns for the last 2 years showing all income reported to IRS.
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Proof of additional income – Gather documentation like court orders, award letters, or 1099s verifying eligible income streams.
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Credit reports – Your lender will pull reports from the three main bureaus but you can request copies in advance.
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Earnest money deposit – Provide bank statement showing funds available for good-faith deposit when offer is made.
Also be prepared to submit the typical paperwork any borrower needs like identification, property information, and insurance documentation.
Alternatives to Getting a Mortgage
If you ultimately can’t qualify for a home loan without income from employment, there are a few other options that may allow you to buy or refinance:
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Partner with co-buyers – Applying with other borrowers who have sufficient income may compensate for your lack.
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Lease with option to buy – Rent the home first with agreement to purchase under specified terms later.
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Seller financing – The seller provides all or part of the financing rather than a traditional lender.
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Hard money loans – Asset-based financing from private investors at higher rates/fees for those who can’t get bank loans.
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All cash offer – Purchase the property outright without financing if you have enough in savings and investments.
Final Thoughts
The bottom line is that mortgages are attainable even if you don’t have a job. While having steady employment does make qualifying easier, responsible borrowers can get approved by demonstrating ample assets, alternate income sources, great credit, and the right loan product. If owning a home is your dream, be encouraged that unemployment doesn’t have to put the brakes on your plans.
Use Assets as Collateral
Using your assets as collateral is another way to get approved for a home loan when you don’t have a job. Lenders will review your assets to determine whether you can liquidate them when necessary to pay your monthly mortgage premium. However, many lenders have rules for the types of assets they’ll accept.
The following assets are examples of what you may be able to use as collateral:
- Real estate
- Vehicles
- Stocks
- Certificates of deposit (CDs)
- Savings accounts
If you obtain a loan using your assets, the lender often puts a lien on them until you’ve successfully paid off your mortgage. If you fail to repay your loan, the lender can seize your assets.
When you obtain a home loan, the property itself serves as collateral. However, with some loan types, such as asset-based loans, lenders use your assets as income to determine whether you qualify for the loan. For home loans, your assets show your cash flow, and lenders prefer to use only liquid assets that you can readily use to pay your monthly mortgage bills.
Can You Get a Mortgage Without a Job?
Can you buy a house without a job? Unemployed individuals or those without full-time jobs may still be eligible for a mortgage loan. However, qualifying for home loans is much more challenging if you don’t have a consistent source of income from a job.
Many people have jobs, but they’re self-employed or gig workers that don’t have typical W2 jobs lenders look for when approving applications for traditional loans. Additionally, retirees are no longer working, but they still have a reliable source of income. Regardless of where your income comes from, as long as you can prove your ability to repay the loan, you can still qualify for a mortgage.
Remember, lenders prefer that borrowers have a reliable stream of income, but that doesn’t necessarily mean you need to have a full-time job or work for an employer. Instead, you can use alternative sources of income, such as small business or freelance, investment, rental, and retirement income. Additionally, some lenders will take into account supplemental income sources such as child support and alimony payments.
With a simple 10-step mortgage process, Griffin Funding strives to make applying and securing a home loan easy, transparent, and quick.
Get Started
Unfortunately, there are downsides to getting a mortgage without a job. Since you might be viewed as a higher-risk borrower since you don’t have a full-time job, lenders can pass some of their risk onto you. Mortgage loans for individuals without jobs typically have higher interest rates because they’re riskier investments for the lender. Additionally, they may come with lower loan amounts and stricter approval requirements to ensure a borrower can repay the loan. In most cases, lenders will require a larger down payment regardless of the type of loan.
Every borrower is different, so while getting a mortgage without a job is possible, you should consider your unique financial situation to determine the right time. If you decide to continue with the mortgage process, the best way to improve your chances of getting approved for a home loan is to increase your down payment to avoid some of the possible challenges.
Unfortunately, getting a home loan is difficult for individuals without full-time jobs, even those with consistent income, because they’re self-employed. Since mortgage lenders usually use pay stubs, W2s, and tax returns, getting a loan when you’re not a regular employee can be more challenging. However, it’s still possible as long as you can prove your ability to repay the loan.
How to get a No Income Verification Mortgage Loan
FAQ
Can I get a mortgage if I have no income?
How to get a Ninja loan?
Can you get a mortgage if you are retired?
Can you get a home loan without a job?
Again − it’s entirely possible to get a home mortgage without a job. In fact, as an unemployed individual, you will still have different home loan types and options available to you. As with the process of securing any home loan, obtaining a mortgage without a job requires having to meet certain eligibility requirements.
Can you get a mortgage without a job?
As with the process of securing any home loan, obtaining a mortgage without a job requires having to meet certain eligibility requirements. Still, a lack of full-time employment is no show-stopping obstacle to homeownership − and you can start the mortgage process today with Rocket Mortgage. Get approved to buy a home.
Can a prospective home buyer get a mortgage without a job?
There are several ways that a prospective home buyer can get a mortgage without a job, either alone or in tandem with another individual. As you might imagine, lenders may consider other reliable sources of income besides a full-time job when researching and determining whether or not you qualify for a mortgage.
Do you need a job to get a home loan?
Rather, what you need is income. Specifically, you need to be able to prove to a mortgage lender that you have a steady income, and that your income is high enough to cover the monthly home loan payments you’ll be on the hook for if your application is approved. But you don’t necessarily need to be holding down a job.