In May 2020, over 33 million Americans filed for unemployment. A result of the social distancing rules due to the COVID-19 pandemic. Many companies could no longer keep the same number of employees in the workplace. Either that or they had to shut down completely. Both resulting in mass unemployment. If you’re part of the millions of people who lost their job during the pandemic. And if you were planning to buy a house. You’re probably worried about not getting that mortgage. The truth is, it’ll be more challenging to get a mortgage now. Plus, you can’t use your unemployment income to qualify for a mortgage. But getting a mortgage while unemployed is not impossible. Here’s what you need to do to get a mortgage while unemployed:
- Manage your finances
As mentioned earlier, your unemployment income will not qualify you for a mortgage. What lenders look for from potential borrowers are:
- Documents that verify that you’ve had a source of income in the recent two years.
- Documents that show you’ll have a source of income in the next three years.
- Your credit score.
The good thing about FHA loans is that you aren’t required to have a steady work history from the past two years. If you’ve had gaps or if you’re currently unemployed. You have to explain to your lender why you’ve had gaps of unemployment, in this case, why you’re currently unemployed, which is because of the pandemic. Moreover, you should also let them know that you are currently looking for a job.
If you’ve had any temporary sources of income during your unemployment, make sure to mention that too, maybe from freelancing or side jobs. Make sure to stay on top of your credit history as well. Lenders will check if you’ve been making your payments on time. The more you give lenders proof that you’ll be able to pay them back. The more confident they’ll be in giving you that mortgage. And if you’ve found a job, inform the lender right away, even if you haven’t started working yet.
- Apply with a co-borrower or co-signor
If you’re married and lucky enough to have a spouse that’s still working while you’re unemployed. They can apply for the mortgage instead. But if you aren’t married, the easiest way to get a mortgage while unemployed is to have a co-borrower or a co-signor. This means that aside from considering your income and credit report. They will also decide based on your co-borrower’s income, credit, and assets. Take note that you are still the primary borrower of the loan. This means you’ll be in charge of paying the mortgage and not the co-signor. The co-signer will only pay for the mortgage if you are unable to do so.
- Apply with an offer letter
If you happen to have gotten a job offer letter during your unemployment, you can use this to qualify for a mortgage. But there are certain criteria the offer has to meet first:
- The job offer must be a written agreement, not verbal.
- You should have a copy of the employment contract, and it should include your starting day and your pay.
- It must be a permanent position.
- Your employer must not be a relative.
- Ideally, the position you’re offered should relate to your previous job. But it isn’t necessary.
When it comes to refinancing a mortgage, the same procedures apply. In the end, all you need to do is show that you’ll be able to pay for the mortgage. And that you won’t stay unemployed for long. If you want that new house of yours, get it. As long as you’re sure you’re making the right decision financially.