You’re unemployed but want to make your homeownership dreams a reality. Or maybe currently own or have earned a home before and are looking to get another mortgage. Is your goal out of reach? Not necessarily.
Although most mortgage lenders prefer that borrowers have a steady source of income, it’s possible to get approved for a home loan without a job.
Why Having a Job Is Important In Getting a Mortgage
A job, whether full-time or part-time, is essential in the eyes of mortgage lenders because it demonstrates that you consistently have earnings coming in. The lender also wants reassurance that you can afford to make timely monthly payments. They will evaluate your income and current debt load to confirm that the amount coming in is enough to cover your current obligations and the housing payment.
Is It Possible to Get a Mortgage Without a Job?
You can still get approved if you’re unemployed but have the income or assets to prove you’re a good candidate for a home loan.
You Have Investments
Do you earn a steady monthly income from investments or dividend payments? The lender may be willing to consider it if it’s seasoned or has been consistent over time and more than enough to cover your expenses.
You Have Other Reliable Income Sources
Other income sources that can help you get approved for a mortgage include alimony or child support payments you receive. Or if you’re paid an income rental property or your retirement account, it may be possible to get a mortgage.
You Have Notable Cash Reserves
If you recently received a hefty inheritance and can meet the lender’s debt-to-income and reserve requirements, it’s not uncommon to be eligible for a mortgage. The same applies if the cash reserves you have on hand are from many years of piling up cash through your hard work and intentional efforts to save a substantial amount of your earnings.
What Type of Mortgage Can You Get Without a Job?
There are two primary types of home loans you may be eligible for without being employed:
- Asset Depleted Mortgage: This home loan uses your assets instead of income to qualify you for a mortgage. You must demonstrate that you have enough liquid assets to cover your mortgage payments, current debt obligations and other living expenses. Furthermore, you’ll likely need excellent credit and a sizable down payment to qualify for this mortgage.
- No Income Verification Mortgage: You won’t present traditional income documentation, like pay stubs and tax returns, to prove your income when applying for a no-income verification mortgage. Instead, the lender will use alternative means, like bank statements or asset statements, to determine if you’re eligible for a home loan. Since this mortgage product poses an elevated risk to the lender, higher interest rates and down payment requirements aren’t uncommon to offset the risk of loss to the lender.
What Documents Can You Present Instead?
If you’re seeking a traditional mortgage, you’ll generally need to provide recent pay stubs, W-2s, tax returns, 1099s, bank statements or a combination of these documents to substantiate your income.
But if you’re seeking a mortgage without a job, expect the lender to request the following:
- Bank statements for all personal and checking accounts to reflect the amount of cash you have on hand
- Statements for investment accounts, retirement accounts and any other asset accounts you have in your possession
- Proof of self-employment earnings through 1099s, bank statements and tax returns
- Evidence of alimony or child support payments you receive
- Documentation that proves you receive any other forms of income indicated on your mortgage application
Other Tips to Get a Mortgage Without A Job
Before applying for a home loan without a job, consider these suggestions to help make the process easier to navigate.
Include a Co-signer
A co-signer with a reliable source of sufficient income and a good or excellent credit score can make it easier for you to get approved for a mortgage without a job. This individual can be a family member or friend, and they must agree to take responsibility for the mortgage payments if you encounter financial hardship and cannot pay. Furthermore, the co-signer becomes personally liable for the total outstanding loan balance if it becomes delinquent, and their credit score will be negatively impacted if payments are 30 or more days late or if the home goes into foreclosure.
Be Honest with Your Lender
It’s always a red flag when the information in a borrower’s application doesn’t quite add up to the information in the documentation provided to lenders. Furthermore, lenders have unique ways of uncovering information borrowers may want to hide to avoid being denied a home loan, so it’s in your best interest, to be honest when you apply. Then, you’ll likely have a chance to plead your case and provide an explanation for your unemployment status.
Get in Touch with a Housing Counselor
Reach out to nonprofit organizations in your area to inquire about housing counseling. Many offer this service free of charge, and sessions are facilitated by counselors approved by the Department of Housing and Urban Development (HUD) to assist prospective homebuyers. A HUD-approved housing counselor can help you tailor a plan of action to prepare your finances and credit profile for a mortgage. Furthermore, they may be able to help you access resources to help make homeownership more affordable, like a down payment assistance grant or a program that helps cover closing costs for low-to-moderate income or first-time homebuyers.
Make a Large Down Payment
A larger down payment minimizes the risk the lender assumes if they decide to approve you for a mortgage. You can also avoid paying private mortgage insurance (PMI), which adds hundreds of dollars to your monthly mortgage payment, by putting at least 20 percent down on the purchase.
Pay Off Any Debt and Improve Your Credit
Your credit utilization rate accounts for 30 percent of your credit score. It’s calculated by dividing your aggregate balances on revolving or credit card accounts by your total credit limit. Ideally, this figure should be at or below 30 percent to give yourself the best chance at a healthy credit score – 10 percent is even more ideal.
Look for a Lender Offering Non-traditional Mortgages
A quick Google search often isn’t enough to find the best lenders offering non-traditional mortgages. You’ll need to do more research to identify reputable lenders with innovative mortgage products committed to providing you with an exceptional lending experience.
Start by considering Angel Oak Mortgage Solutions, a full-service mortgage lender specializing in assisting borrowers with varying financial backgrounds. Its offerings include non-QM home loans for unique borrowers and traditional home loans.
Don’t let your employment status stop you from getting a mortgage. Reach out to Angel Oak Mortgage Solutions today to learn more about its home loans and which could be ideal for you.
