Getting a Mortgage Loan When You’re Unemployed: What are Your Options?

Losing a job can be an incredibly stressful experience. Between suddenly losing your main source of income and having to quickly adjust your budget, it can completely upend your life. This is especially true if you were hoping to become a homeowner soon and now find yourself unemployed.

Many people think that they won’t qualify for a mortgage without steady employment. While getting approved can be more challenging, it is possible in some cases to get a mortgage loan when unemployed. Let’s take a look at what options may be available.

Can You Get Approved for a Mortgage Without a Job?

The first question on your mind is likely – can I even get approved for a home loan if I’m not currently employed? The short answer is yes it is possible, but you’ll face more obstacles than borrowers who have a steady paycheck coming in each month.

Lenders generally look for the following when reviewing mortgage applications:

• Stable income – They want to see that you have a reliable source of funds to make payments. Employment is the most common way to show this.

• Good credit – Your credit history and score give insight into how responsibly you manage debts. Strong credit improves your chances.

• Down payment – A larger down payment reduces the risk for lenders. It lowers the amount you need to borrow.

If you don’t have current employment, you’ll have to make up for this missing piece by bringing other strengths to the table, such as a large down payment or assets to offset the lack of income.

6 Options for Getting a Mortgage Without a Job

If you’re determined to get a home loan without steady employment, here are some routes you could potentially take:

1. Leverage Other Sources of Income

Even if you aren’t working a 9-to-5 job, you may have other sources of regular income you can rely on to qualify:

• Retirement funds
• Disability benefits
• Royalties
• Rental income from investment properties
• Child support or alimony
• Self-employment or freelance work

Including documentation of these income streams could help demonstrate your ability to handle a mortgage payment each month.

2. Tap into Your Savings

For some mortgage programs, you may be able to use your assets instead of income to qualify. These asset depletion programs allow you to leverage your savings and investments to prove you can cover the monthly payment. The assets themselves aren’t spent on the down payment or mortgage – they simply serve to satisfy the lender’s income requirements.

3. Apply with a Co-signer

Bringing a co-signer with good credit and stable income onto your application can improve the chances of getting approved. Their information enhances the overall financial profile. However, co-signers take on equal responsibility for the mortgage, so it’s a significant commitment on their end. Make sure they fully understand the risk involved before moving forward.

4. Work with a Housing Counselor

HUD-approved housing counselors have extensive knowledge about the homebuying process and available loan programs. They can evaluate your situation, help with credit improvement if needed, and match you with lenders offering options for the unemployed. Their assistance comes at little or no cost.

5. Explore Government-Backed Loans

Certain government mortgage programs are more flexible than conventional loans in their income requirements:

• FHA loans – Require just 3.5% down and can use non-employment income.

• VA loans – Offer 0% down payment options for veterans and service members.

• USDA loans – Provide 100% financing and low rates in rural locations.

Government programs tend to be more forgiving of credit flaws and employment gaps if you meet their other guidelines.

6. Ask about Alternative Mortgage Types

Some lenders offer mortgage products specifically designed for self-employed borrowers or those with irregular incomes. While rates may be higher, they provide more leeway with income verification and documentation. No income verification mortgages are one example.

Refinancing When Unemployed

If you already have a mortgage but lost your job, you may also be wondering if a refinance is possible. As with a new home purchase, refinancing without steady employment comes with challenges but can be done in certain cases, such as:

• You have ample assets or alternative income sources.

• You apply with a co-signer.

• You qualify for a government streamline refinance program. These allow existing FHA, VA, or USDA borrowers to refinance easily within the same loan program. Limited documentation is required.

• You find lenders offering mortgage refinancing options for the unemployed.

Refinancing can potentially lower your interest rate and monthly payments – providing relief if money is tight due to job loss. But make sure to weigh the pros and cons before moving forward.

Tips for Improving Your Chances

When applying for a mortgage without stable employment, keep these tips in mind to strengthen your case:

• Clean up your credit – Any credit dings or errors could impact approval odds.

• Lower your debt – Reduce credit card balances and other debts to lower your DTI.

• Make a sizable down payment – At least 20% down is ideal to reduce risk for lenders.

• Gather documentation – Have bank statements, tax returns, and paperwork for any non-employment income ready.

• Work with an experienced loan officer – They can advise you on programs and loans available for the unemployed. Ask about alternatives if you get denied.

• Consider a co-signer – Their income and credit can give your application a big boost.

The Bottom Line

Losing a job makes getting a mortgage more difficult but not necessarily impossible. Tap into other income sources, leverage your assets and savings, clean up your credit, get a co-signer, or explore specialized mortgage programs for those with irregular incomes. With persistence and a strategic approach, homeownership may still be within your reach.

Frequency of Entities:

mortgage loans for unemployed: 11
rocketmortgage: 1
quickenloans: 1