Mortgage

I’m unemployed. Can I nonetheless purchase a home or refinance my mortgage?

Can You Get An Unemployment Mortgage?

Bad news first. If you have recently been laid off due to the COVID pandemic or otherwise, your unemployment income cannot be used for a mortgage.

But don't give up on your home buying plans just yet.

It is possible to buy a home very soon after returning to work – or even before starting a new job if you have a strong letter of offer.

If you keep your finances in order during unemployment, those short hours of work shouldn't keep you from buying a home once you're back on your feet.

Check your eligibility to buy a home today (November 9, 2020).

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Unemployment Income and Mortgages

If you are currently unemployed, most likely your lender will not be able to use your unemployment income to qualify for a home loan.

The reason? It depends on how lenders calculate and verify income.

The basic mortgage standard is as follows: Lenders must provide evidence of verifiable income from a fixed source for at least two years.

Your lender must also determine that the income is likely to remain in the future, usually for at least three years.

To document the past 24 months, home buyers typically need to provide several documents:

The last two years of the W2 forms or, if you are self-employed, the last two years of the income tax return. Possibly bank statements

Someone who is newly unemployed may have a stable work experience. And they could have the savings it takes to make a down payment.

However, a lender cannot verify their future income.

In fact, the maximum number of weeks that most states will allow someone to receive unemployment benefits is 26 weeks. That's six months, not three years.

For these reasons, the unemployment income can be used for daily expenses. However, it cannot be counted when you qualify for a new mortgage.

Buying a home according to unemployment income

Here's the good news. If you are currently unemployed, you probably won't need to complete a new two-year career history when you return to work.

In fact, you may not have to wait at all before applying for or re-applying for a mortgage.

Whether or not your loan application will be processed at this point will depend on a number of factors:

How soon do you expect to get back to work? Whether you have income from other sources, e.g. B. a temporary or part-time job. How did you manage your finances while you were unemployed (i.e., were your other loan payments made on time?), Whether your credit was free of late payments or late payments

Below are some strategies that will help you get your mortgage application back on your way quickly after you're back to work.

Applying to a co-borrower can make work easier

If your application includes a co-borrower, it may be easier to take out a mortgage after unemployment.

Your lender may use your co-borrower's income, debt to income ratio, credit history, creditworthiness, and wealth to assess their ability to make monthly mortgage payments.

Another option can be a co-signer with no inmates. While co-signers generally cannot help make up for bad credit, they can be especially helpful in closing income gaps on a mortgage application.

Qualify for a mortgage based on a letter of offer

If you've been fired or on leave due to coronavirus but received a job offer, there may be another option for you.

Most lenders accept a job offer and even allow you to close your loan without actually starting the job.

Job offer letters are generally considered if they meet six basic criteria:

The letter of offer must not contain any terms and conditions of employment, such as: B. "depending on a clear background check". The start date stated in the offer letter must be within 90 days of the mortgage closing date. You must provide evidence that the home you have purchased is your primary residence. You will need to provide evidence that the home you purchase is either a detached single family home, townhouse, condominium, or planned unit, and you will need to be able to provide evidence that you have adequate reserve funds to cover mortgage payments, property taxes and homeowner insurance in the time between closing and your start date (usually up to three months) plus three additional reserves worth months to be paid

If all of these conditions are met, you can take out a mortgage and buy a home with just one letter of offer – before you get back to work.

Check Your Mortgage Eligibility (November 9, 2020)

What about the refinancing?

In general, the same income rules for home buyers also apply to homeowners looking to refinance.

If you currently have a conventional loan – one backed by Fannie Mae or Freddie Mac – and are unemployed, you will likely need proof of new employment and future income before you can refinance your loan.

The only possible exception is for homeowners with VA or FHA loans.

These government-sponsored mortgages have access to Streamline Refinancing – a low-doc refinance loan program that eliminates the need for the lender to re-examine your income or employment.

Many mortgage lenders check income and employment anyway because they want to know that you can make your loan payments.

However, if you can find a lender who offers streamline refinancing without proof of income or proof of employment, you may be able to refinance into today's low mortgage rates even if you are unemployed.

Seasonal workers and contractors may be able to use unemployment income to qualify

For seasonal jobs like landscaping and construction, unemployment income can be taken into account.

This is because these professions may have regular unemployment income during the off-season.

Here is an example. Seasonal workers usually do a job, the job is done, and then they get fired. When a new project comes up, they are re-set.

In the period between projects, the seasonal worker applies for and receives unemployment income.

In this case, the seasonal unemployment income can be used to qualify for mortgages.

However, it must still adhere to the two-year rule. If a seasonal worker can show that they have received unemployment benefits continuously for at least two years, this can be taken into account when applying for a mortgage.

However, there is one important caveat to be aware of.

Unemployment benefit can not used to qualify the borrower, unless clearly associated with seasonal employment indicated on the federal income tax return signed by the borrower.

And the lender needs to check that the seasonal income is likely to continue.

Additional considerations on unemployment income

According to your credit rating, your income plays an important role in the home loan process.

Even if the unemployment income can rarely be averaged and counted towards a mortgage qualification, there are a few important points to consider.

While unemployment income can be averaged over the past two years as well as the start of the year, your lender will need to review income from a current job in the same area. This means that you must be employed at the time of your application.

Mortgage borrowers CANNOT count unemployment if they are currently unemployed.

If you are currently unemployed, your lender may not count your previous job or unemployment income until they can verify that you have a new job.

Don't write off your buying plans because you lost your job

Low interest rates continue to break records, making home affordability more attractive than ever.

While unemployment income can stifle your plans, hope is NOT lost.

Even if the coronavirus pandemic has had a negative impact on your income and employment, that doesn't mean you won't be able to take advantage of mortgage rates in your 2s and 3s.

Talk to some mortgage lenders about your specific situation. There's still time to join millions of other homeowners who have already benefited from an incredibly hot real estate market.

Check your new plan (November 9, 2020)

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