Mother and daughter eating breakfast in refinanced home with seasonal income.

Can I Get A Mortgage Or Refinance A Loan Without A Job?

6-Minute Read
Published on September 28, 2021
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For people who are self-employed or seasonally employed, or those who are currently experiencing an employment gap, applying for a mortgage can be a particularly nerve-racking experience. Mortgage lenders like easy employment verification and a few years’ worth of W-2s when they’re considering a mortgage loan application, because they consider them less risky than other types of employment.

But as a borrower, you don’t want to be penalized for not having a job when you’re confident in your ability to repay a mortgage loan, or if you want to refinance your mortgage to lower your monthly loan payments. Smaller loan payments can be especially helpful if you’ve recently lost your job and are worried about your monthly budget.

Unfortunately, many lenders hesitate to approve new mortgages or refinance loans for unemployed borrowers. While it can be challenging, it isn’t impossible.

Can You Get A Loan Without A Job?

Yes, you can purchase a home or refinance if you’re unemployed, though there are additional challenges. There are a few things you can do to improve your chances as well.

Many lenders want to see proof of income to know that you’re able to repay the loan. Of course, just because a mortgage applicant is unemployed does not mean they won’t repay the mortgage.

How To Get A Mortgage Or Refinance With No Job

Acquiring or refinancing your mortgage while you’re unemployed isn’t impossible, but it will take a little more effort and creativity to meet the standard refinancing requirements. Unfortunately, lenders often won’t accept unemployment income as proof of income for your loan. There are exceptions for seasonal workers or employees who are part of a union. Here are some strategies you can use to help you obtain or refinance your loan without a job.

Consult A Housing Counselor

If you’re not sure where to start, a great first step is to speak with a professional about what is needed to get or refinance your loan. The U.S. Department of Housing and Urban Development (HUD) offers a list of free or low-cost counseling services available where you live. They’ll be able to help you put a budget together, clean up your credit if you need to, or help you find the right government-backed loans – FHA for low-income borrowers or those with shaky credit, VA loans for our nation’s veterans and their families or USDA loans for rural homes. They’ll also be able to explain the many different types of mortgages available to home buyers. Plus, they may be able to help you work through different alternatives to find a way to refinance your home.

Find A Co-Signer

Getting a mortgage co-signer can greatly improve your chances of being approved for a mortgage or refinancing without having a source of income. A co-signer is a person who pledges to the lender that they will make your mortgage payments if you don’t. This gives lenders more assurance that the loan they make will be repaid.

Adding a cosigner helps because you’re adding their income to the loan. Of course, when you add their income, you’re also adding their debts, so it’s best to apply with someone who has a low debt-to-income ratio (DTI).

A co-signer is also beneficial for someone who has a bad credit score, depending on the type of loan you’re getting. Most mortgage investors take a look at the lowest median credit score between two or more borrowers when it comes to the qualifying credit score. However, Fannie Mae takes the average median credit score between two or more borrowers. Given this, you could have an easier time qualifying if the other person’s score is significantly higher.

It’s important that your co-signer understands the responsibility they’re undertaking before they agree to co-sign. They’ll be legally responsible for your loan payment if you don’t repay it.

Make A Larger Down Payment Toward Your Home Purchase

While lenders love to see income, they understand that lack of employment doesn’t always mean that a borrower can’t make their monthly mortgage payments. If you have saved or investment assets, and can make a larger down payment to assuage lender concerns over your lack of income, you  may be able to get approved with a good credit score and history.

The theory here is that a larger down payment leads to a lower interest rate as well as a smaller balance, both of which mean more manageable monthly payments.

No Income Verification Mortgage

A no income verification home loan is a type of nonqualifying mortgage. Typically, these loans charge higher interest rates than qualifying loans, but can be easier to get approved if you’re self- or seasonally employed. Rocket Mortgage® does not offer this type of mortgage.

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Documentation You’ll Need To Apply For A Purchase Mortgage Or Refinance

There’s a lot of documentation that’s required when you apply for a mortgage or refinance, and it’s a good idea to get this paperwork together early and look for additional information that could help you qualify for a new purchase mortgage or a refinance. These documents include:

  • Account information
  • Tax returns
  • Bank statements
  • Recent pay stubs
  • Proof of insurance
  • Proof of unemployment
  • Financial details of your co-signer (if there is one)
  • Proof of any additional income, like freelance work or investment income

Talk To Your Lender

Talk to your lender about your desire to get a purchase mortgage or refinance while unemployed. Can they offer any alternatives, like a new repayment plan? Do they know of programs geared toward people in your situation, like, for example, programs designed to help first-time home buyers? You may also want to speak to your lender about a mortgage refinance or other alternatives, like a mortgage repayment plan.

It’s worth noting that if you go on a repayment plan, this is generally after a forbearance. We’ll discuss how those work a little later.

Choose A Refinance Plan That Works For You

If you’re able to secure mortgage refinancing with your lender, make sure the new mortgage rates and monthly payments work for your situation. It’s helpful to use a mortgage calculator to confirm that the new payments work within your budget.

Government-Backed Loan Refinance Options For Unemployed Borrowers

If you have an FHA or a VA loan, there are two other “streamline” refinance options available. These may be easier to qualify for if you have reduced income from unemployment.

FHA Streamline

An FHA Streamline refinance is an option for homeowners with an FHA home loan, and does not require a new appraisal. You’ll need to meet the FHA’s credit score and debt-to-income ratio (DTI) requirements to qualify.

VA Streamline

A VA Streamline refinance is similar to the FHA Streamline, and is available for homeowners with a VA loan. Less documentation is required, and you may not need an appraisal.

What To Do If You Can’t Refinance

Refinancing won’t always be an option, but that doesn’t mean you’re out of options. There are other alternatives you can consider working through with your lender. Let’s look at a couple of those.

Ask For A Loan Modification

Even if your lender isn’t able to refinance your loan, your mortgage servicer may be do to a loan modification. With a loan modification, you might be able to get your interest rate reduced or lengthen the term of the loan, reducing your monthly payments. Try out our refinance calculator in order to estimate the difference a loan modification can make for you.

It’s important to note that you should only ask your mortgage servicer for a loan modification if you can’t afford your existing payments. It has a negative impact on your credit and you may have to wait a certain amount of time before qualifying for a mortgage in the future. Modifications in the aftermath of natural disasters or a COVID-19 forbearance may not impact your credit.

Request A Loan Forbearance

If you’re struggling to make your loan payments, a mortgage forbearance might be a better option than refinancing. A mortgage forbearance is an agreement to temporarily pause your loan payments. Before agreeing to a forbearance, make sure you understand how repayment works. Will your monthly payments increase after forbearance or will your loan term lengthen?

If it’s the former, it’s a repayment plan. If it’s the latter, it’s a loan modification. Depending on the reasoning for your forbearance, you may have other options as well. For example, those impacted by a natural disaster or COVID-19 may have the option to defer the paused payments, until they refinance, the home is sold or they pay off the loan.

The options you have after a forbearance to bring your loan current will depend upon the type of loan you have and what led to your forbearance. The same goes for the impact of the forbearance on your credit.

The Bottom Line: You Can Get A Mortgage Or Refinance Without A Traditional Job

Acquiring or refinancing a mortgage when you’re unemployed is tricky, but not impossible. And if you don’t qualify for refinancing, there are other options to consider, depending on the type of mortgage you already have. Read more about refinancing a mortgage. Ready to apply or have questions? Get started with your application or give us a call at (888) 452-0335 today!

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Victoria Araj

Victoria Araj is a Section Editor for Rocket Mortgage and held roles in mortgage banking, public relations and more in her 15+ years with the company. She holds a bachelor’s degree in journalism with an emphasis in political science from Michigan State University, and a master’s degree in public administration from the University of Michigan.