Let’s take a look at how to get a mortgage without a job, what it looks like when shopping for one, and the downsides to acquiring a mortgage while unemployed.
Mortgage-Shopping While Unemployed
There is a wide variety of mortgages available for every type of customer. Specific requirements will differ, depending on the loan you’re seeking, but income is a pretty universal criterion in order to be approved. That said, it’s still possible to get a mortgage while unemployed; banks can and will consider nontraditional methods of funding your loan.
Having a Co-signer
Those with a limited credit history already may be familiar with co-signers. In this case, another individual also will attach their name to your loan. A co-signer can be anyone you know, like your parents or close friends, but becoming a co-signer can be considered risky for those agreeing to this commitment. Like you, co-signers take on the liability for your mortgage. This means that if you default, they’re on the hook for making payments.
Relying on Investments
Do you have a nontraditional source of income, such as sizable dividend payments from a stock portfolio? It’s possible to use money derived from these sources to qualify for a mortgage, but you’ll need to meet certain requirements. This will depend on your lender, but may require that you’ve received this income for at least two years.
Employing Cash Reserves
There are nearly always costs associated with getting a mortgage, such as a down payment and closing costs, but if you have significant cash reserves, your lender may be willing to approve your loan, even when you don’t hold a job. This may be the case if you’re in between work and searching for another job, but it also applies if you’re not planning on returning to regular employment. In either scenario, your lender will want proof that you have the ability to make regular mortgage payments until the loan ends.
Securing a Job-Offer Letter
Are you in the middle of changing jobs? Whether you’re relocating elsewhere or have simply opted to start with a new company, many lenders are willing to accept job-offer letters as proof of future income. There are restrictions tied to this, which you’ll want to check with the bank you’re using.
Other Sources of Income
Many other sources of income can be used to help you qualify for a mortgage, including alimony, unemployment, child support, disability, public assistance, retirement benefits, and even U.S. Department of Veterans Affairs (VA) benefits. As always, you’ll need to meet certain requirements for this income to qualify. You may, for example, need to prove that you’ll continue receiving these benefits for at least three more years.1 Although unemployment benefits generally are considered short-term in nature, these payments also can be used as income in special cases. This is true if your unemployment arises as a result of seasonal employment, for example.
Downsides To Getting a Mortgage Without a Job
When a lender chooses to approve you for a mortgage without employment, they’re taking on increased risk. As a result, they’ll pass on some of this risk to you, with aspects such as:
Higher interest rates Lowered borrowing ability Shorter-term loan lengths Stricter approval requirements Larger down payments
This is true for any loan type when you’re not working, including personal or other unsecured loans. You’ll also want to consider the personal risk you’re taking on when getting a mortgage without a job. Defaulting on a mortgage can have a long-term negative impact on your credit history and may cause other difficulties in your life.
How To Get a Mortgage Without a Job
The steps for getting a mortgage without having a job are similar to those you’ll need to take when working. First, you’ll want to take a look at your credit. The higher your credit score, the better—lenders will review these scores to determine your risk, so a better score can translate into lower interest rates. If you’re happy with your credit score, you’ll then want to calculate your housing budget. This will be affected by your down payment and how much home you can afford. Be careful not to overspend; being house-poor can leave you vulnerable in case of emergencies. Once you’ve decided on a budget, you’ll want to gather your paperwork. This will include documents such as bank statements, tax returns, evidence of any additional sources of income, proof of funds, and your Social Security number. Depending on how you’re planning to qualify, you’ll likely also need other paperwork. For instance, if you’re relying on a co-signer, you’ll need to provide their information as well. After you’ve gathered everything, you should search for a lender. Be aware that interest rates and fees can vary significantly among lenders, so rate-shopping is always a good idea. When you and your lender have come to an agreement, you’ll receive a pre-approval letter, which you can take with you on your home search. After that, it’s a matter of finding the right property, submitting all your documentation, and closing on the loan. Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning!
