Can You Get A Mortgage Without A Job? A Guide For Unemployed Home Buyers

Buying a house not only provides a safe place to lay your head at night, but it’s also a fantastic way to pass on generational wealth and represents an important piece of the American dream for most. But not everyone has a cookie-cutter, easily approved financial situation. You may be wondering whether you can get a mortgage without a job.

Can You Buy A House Without A Job?

Yes, you can buy a house without a job. Lenders aren’t looking so much for employment as much as they are continuity of income. Do you have money coming in to pay your bills every month? Documentation just might be a little more complicated.

It doesn’t matter to an underwriter whether you work 40 hours a week for a Fortune 500 company or you’ve been retired for 10 years. It only matters whether you have enough assets or income to get a mortgage. Employment doesn’t matter. Lenders want to know you can make the monthly payment.

Examples of those able to buy homes would be people who can rely on spending down retirement income. You might also be able to buy a home if you’re reliant on SSI or disability as your primary income source. You could also get a home drawing income from a trust. That’s one way individuals who have disabilities and cannot work pay for their living expenses.

Special Considerations For Buying A House Without A Job

Buying a house without a job is more than possible. It can be your reality. However, you should be prepared to deal with certain complexities:

• You’ll likely qualify for fewer types of home loans. Certain loans may have stricter requirements in terms of the types of income that can be used to qualify based on lender or mortgage investor requirements.
• Riskier borrowers typically receive higher interest rates. If you’re using assets as income in order to qualify for the mortgage (think bank statements and investments), you may be limited in the amount that can be put toward the down payment or shown for reserves. Given this, you may be considered a higher risk borrower who only qualifies with a higher rate.
• The home buying process might take longer. Because you may need more and varied documentation, the underwriting process can take longer. This may push out the time to close.
• Mortgage approval requirements may be more rigid. Based on not having employment-based income, mortgage approval requirements may be higher for the documentation you’re using to qualify. For example, it could require a higher down payment or more reserves.
• You may need unique documentation. If your income isn’t job related, some different documentation may be required. For example, if you’re qualifying with alimony, your lender is going to need to see your separation agreement or divorce decree, depending on how far along you are in the process of your split.

How To Buy A House Without A Job: 6 Methods

If you’re looking to buy a house without a job, there are six methods you can look at to help you qualify.

1. Utilize Investment Income

There are two types of income that can both be used to qualify for mortgage. One is traditional job-based income, but the other one that’s not as talked about is passive income from things like investments or rentals.

This could be everything from dividends and money made from the sale of stocks and bonds to income made from a real estate portfolio. You can use the income from a different property to help you to qualify to buy a new one as long as you continue to rent out the home. It’s typically only a certain percentage of the income because lenders account for time when you would have to find a new tenant.

2. Lean On Cash Reserves

Cash reserves are defined as the number of months of payments you could make if you had a sudden loss of income. The amount and whether you need reserves will vary depending on your situation and the type of loan you’re looking for. If you’re unemployed, your lender may allow you to qualify if you can show more months of reserves.

3. Use Assets As Collateral

Assets can be used as collateral, often along with the loans that back them. This enables you to use the money toward funds to close and reserves. It’s just important to know that if you use the proceeds from a loan to qualify, that payment is included in your debt-to-income ratio (DTI).

Other examples of commonly used assets for qualification include stocks and bonds that could easily be sold if you need cash. This means you can’t use restricted stock units that haven’t vested, but it does provide flexibility.

You can also do things like use retirement savings for both funds to close and reserves as well as to make your mortgage payment, but the amount used to make the mortgage payment on a regular basis is backed out from the amount available for closing costs and reserves. Work with your Home Loan Expert.

4. Use A Co-Signer

As long as you meet the minimum credit score qualifications for a loan, applying with a co-signer who has good credit and income can be helpful. Having a co-signer enables you to potentially qualify for more because you can use their income to qualify for the mortgage payment.

It’s important to note that you and your co-signer will need to know what you’re getting into. If for some reason you can’t make your payment, your co-signer is equally obligated on the loan. This means your loan is essentially their loan from the perspective of financial and credit obligations.

5. Increase Your Down Payment

A bigger down payment not only means a chance at a lower rate, but it’s also a way to end up lowering your DTI because you’ll have a lower mortgage payment relative to what it would be with a bigger balance. In this way, a bigger down payment can be one of the most effective boosts to your qualification prospects.

6. Work With A Housing Counselor

The Department of Housing and Urban Development (HUD) offers housing counseling. When people think of this, they often associate it with having trouble making your payment. While that is one service housing counseling can help with, they can also help you get ready for homeownership.

A local housing counselor may offer courses on financial management, budget and credit counseling, home buyer education and prepurchase readiness and fair housing workshops so you understand your rights. You can find counselors online or call (800) 569-4287.

Which Mortgages Can You Use To Buy A House Without A Job?

If you’re looking to get a mortgage without a job, there are several different avenues you can take.

• Qualifying with other income: Nothing we’re about to describe here is an exotic mortgage by any stretch of the imagination. But the traditional way to qualify for a mortgage is to show income. That income doesn’t have to be just from a job. It can come from Social Security, disability, VA benefits, child support or alimony, for example.
• Streamline refinance mortgage: Streamline refinances are traditional mortgages, but you may be able to refinance without showing income records based on your past history paying a mortgage. You can’t use this to take cash out and there has to be a net tangible benefit. For example, your rate has decreased by a certain amount with no more than a $50 increase in your payment.
• Asset depletion: Asset depletion is based on the idea that you qualify for a mortgage by treating assets like income. In other words, if you had retirement funds or an annuity, you would treat the distributions taken on a regular basis as income used to qualify. There are ways to use this to not only qualify for income, but to pay for closing costs and reserves as well.

Can You Get A Home Loan Without A Job? FAQs

Now that we’ve gone over the broad strokes, let’s touch on a few more specifics before wrapping up.

Can I get a traditional mortgage without a job?

It’s very possible to get a traditional mortgage without a job. What may not be traditional is the types of income used in the mortgage application process. That’s not really a problem, but you’ll just need to be prepared to share different documentation.

How many months of income do I need for a mortgage?

Lenders refer to this as cash reserves. They may require more months of reserves based on the type of income being used to qualify in some cases. As a general baseline in the absence of income restrictions, when reserves are required, it could be as little as 2 months. On the other hand, it could be up to 18 months for a big Jumbo Smart loan from Rocket Mortgage^®.

Can I get a mortgage if I’ve accepted a new job that hasn’t started yet?

It’s possible to do this. Just be aware that your lender may require more documentation. In general, you’ll have better luck qualifying if the new job includes a significant raise or bonus. It also tends to help if the job is in the same line of work as your previous employment.

Can I get a mortgage on Social Security?

You can get a mortgage while on Social Security. You just have to be able to show either a history or a likelihood that the Social Security is going to continue if it’s new. Assuming the income is legally sourced, your lender doesn’t care where it comes from as long as you’re getting it regularly.

What happens if I lose my job while buying a house?

If you lose your job while in the process of buying a house, your lender can no longer use the income from that job in order for you to qualify. You may still be able to buy if you can show sufficient income from other sources. However, there’s obviously no guarantee.

Can I refinance my house without a job?

It is possible to refinance your house without a job. It may require documentation of another income source. In certain circumstances on a streamline refinance where your rate is dropping, you may not have to show income documentation if you’re moving to another one with the same mortgage investor and you have a history of paying on time. That doesn’t always apply though.

The Bottom Line: You Can Get A Mortgage Without A Job By Showing You’re A Worthy Borrower

It’s absolutely possible to get a mortgage without a job. You should be aware that the process may be more complex and require other documentation, whether that’s in terms of sources of income or assets. Think about the income and assets you have along with the possibility of working with a co-signer.

If you’re ready to discuss your options, you can start your application with our friends at Rocket Mortgage.