For those who are self-employed, seasonally employed or experiencing a gap in employment, the mortgage approval process can be especially involved. Lenders often request employment verification and documentation such as W-2s or recent pay stubs.
Because this proof of income is requested up front during the application process, many people believe they can’t qualify for a new mortgage or refinance loan if they’re unemployed or don’t work a traditional job. But while getting approved under these circumstances can be challenging, it’s still possible.
So the answer to “Can I get a loan without a job?” and “Can I get a mortgage while self-employed?” is yes. Let’s explore your mortgage and refinance options when you’re unemployed or don’t have traditional employment.
Key Takeaways:
- The mortgage underwriting process can be simpler for applicants who have a full-time job with easily verifiable income.
- That said, if you’re currently unemployed, a seasonal worker or self-employed, you may still be able to qualify for a home loan if you can demonstrate sufficient income or assets to repay the loan.
- Alternative ways to verify income during the application process include using business tax documents to prove self-employment earnings.
- Those unable to verify regular income to a lender’s satisfaction can pursue other avenues, such as getting a co-signer or making a larger down payment.
How To Get A Mortgage Or Refinance Without A Job
You may be able to purchase a home or refinance if you’re unemployed or not employed in the traditional sense. But you’ll need to jump through a few extra hoops.
Lenders generally require proof of income to ensure a borrower can repay the loan. But they’re aware that just because a mortgage applicant is unemployed, or not employed in the traditional sense, doesn’t mean they won’t be able to do that.
This means the application process simply differs somewhat from the one people with a regular salaried position – one that issues a W-2 tax form – typically experience.
While getting a mortgage without a job usually takes more time and effort, there are steps you can take to improve your chances of approval:
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1. Consult A Housing Counselor
If you’re not sure where to start, a good first step is to speak with a housing expert. The U.S. Department of Housing and Urban Development (HUD) offers a list of free or low-cost counseling services available nationwide. The agency can help you create a budget and improve your credit if needed, as well as assist you in exploring government-backed loan options.
Government-backed loans include Federal Housing Administration (FHA) loans, for low- or moderate-income borrowers, and Department of Veterans Affairs (VA) loans for veterans, active-duty military personnel, members of the Army Reserve and National Guard, and surviving spouses who meet specific eligibility requirements. There are also U.S. Department of Agriculture (USDA) loans, which offer a 0% down payment option for low- and moderate-income borrowers who are willing to live in a rural area and meet certain conditions.
A housing counselor connected with HUD will be able to provide a comprehensive overview of these and the various other types of mortgages available to home buyers. They can also help homeowners work through alternative solutions for refinancing their home.
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2. Find A Co-Signer
An alternative to finding a loan that can be secured without a traditional (or any) job is to ask a trusted family member if they will co-sign your home loan. A mortgage co-signer is someone who agrees to make your loan payments if you’re unable to do so. Having one can significantly increase your chances of being approved if you don’t have a steady source of income or if you have a lower credit score.
With this option, during the underwriting process, your lender will verify your co-signer’s income. Of course, when you add another person’s income to a loan application, you’re also adding their debts, so it’s best to apply with someone who has a low debt-to-income (DTI) ratio. It’s essential, however, that your co-signer understands the responsibility they’re taking on before agreeing to co-sign your loan. They’ll be legally responsible for your mortgage payment if you don’t pay it.
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3. Make A Larger Down Payment
If you don’t have a job but you do have money saved or investment assets, there’s another way you can ease lender concerns over your lack of income. If you make a substantial down payment, you may be able to get approved as long as your credit history and credit score are good enough.
The logic here is that a larger down payment decreases the lender’s risk on the loan, since it leads to a lower loan-to-value (LTV) ratio. In addition, a larger down payment may help you qualify for better loan terms and could reduce your interest rate.
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4. Offer Proof Of Freelance Or Self-Employment Income
If you’re self-employed or earn a living doing contract work, and can prove you earn regular income with tax documents, such as business tax returns or 1099 tax forms, you can use these as proof of income to obtain a home loan.
Many lenders require up to 2 years of personal and business tax returns for self-employed borrowers. Keep in mind that factors beyond income, like creditworthiness and DTI ratio, can also affect whether a lender approves your mortgage application.
5. Consider A Loan With Nontraditional Income Verification
Can you get a loan without a job if you’re self-employed with irregular or inconsistent income? It may still be possible. Some lenders offer nonqualified mortgages (non-QM loans), which use alternative income verification methods. It’s a more flexible option for those who can’t rely on traditional income verification.
To be clear, you’ll still need to show that you have enough income or assets to repay your loan. But no-doc mortgage lenders rely on alternative ways of verifying your income. Instead of traditional means like pay stubs, they may accept other financial records, such as 12–24 months of bank statements, as proof.
They may also offer asset-based loans, another kind of no-doc loan. With these, lenders verify that you own sufficient assets that can be converted into cash, such as investment or savings accounts, to demonstrate that you’ll be able to cover your monthly payments.
Whatever the type, no-doc loans are riskier for lenders. For this reason, it’s not unusual for them to come with higher down payment requirements (often 10 – 25%) and higher interest rates than traditional mortgages. Additionally, to qualify you’ll need to have good credit, often around 660–700 or higher depending on the lender
Not all lenders offer home loans like this, so you may need to spend some time looking for one. But if the traditional mortgage route isn’t ideal for your situation, no-doc loans are worth exploring to reach your homeownership or financing goals.
FAQ
The Bottom Line: It May Be Possible To Get A Mortgage Without A Traditional Job
When you’re unemployed or self-employed, applying for or refinancing a mortgage can be tricky, but that doesn’t mean it’s impossible. Explain your situation to a housing counselor or your lender and let them help you explore your available options.
Ben Shapiro
Ben Shapiro is an award-winning financial analyst with nearly a decade of experience working in corporate finance in big banks, small-to-medium-size businesses, and mortgage finance. His expertise includes strategic application of macroeconomic analysis, financial data analysis, financial forecasting and strategic scenario planning. For the past four years, he has focused on the mortgage industry, applying economics to forecasting and strategic decision-making at Quicken Loans. Ben earned a bachelor’s degree in business with a minor in economics from California State University, Northridge, graduating cum laude and with honors. He also served as an officer in an allied military for five years, responsible for the welfare of 300 soldiers and eight direct reports before age 25.
