Can You Buy a House If You’re Unemployed?

By Realty Times Published Dec 17, 2024 05:21 am

A lot of people in the United States are unemployed right now for various reasons. At the same time, many people are also hoping to buy a new home. Can you buy a home if you’re unemployed?

The short answer is that no, you can’t use your unemployment benefits to get a mortgage, but other options may be available as far as the income you can use.

What Other Income Can You Use to Buy a Home?

There are many types of income you may receive that could be considered if you were trying to get a mortgage. If you have investment dividends or Social Security income, these can be counted as income to get a mortgage.

If you have a co-signer, this is another option.

Unemployment income isn’t considered when you’re applying for a mortgage because it’s short-term. Therefore it’s not qualified income. If you get a mortgage while you’re unemployed, at least one person on your application needs to have financial documentation to show qualification.

Lenders need to document at least two years of a steady income in most cases. A lender also needs to show that income sources will continue well into the future—usually for at least three years. If you’re newly unemployed, a lender can’t verify your future earnings.

In most states, the maximum amount of time you’re eligible for unemployment is 26 weeks at a time. That comes out to around six months, which is well below the three-year threshold.

What If You Return to Work?

If you’re on unemployment currently, you may not need to show a two-year job history to a lender once you do return to work. You may not even have to wait to reapply for a mortgage, depending on certain factors.

For example, these factors can include whether you have income from other sources, how you dealt with your finances overall while you were unemployed, and the size of your down payment.

Even if you haven’t yet started a new job, but you have an offer for employment, you may be able to qualify for a mortgage with the offer letter. The letter may need to show you’ll be employed within 90 days of getting the mortgage, and it should also show how much you’ll be earning.

Applying with a Co-Signer

If your application includes a co-borrower, this will make it easier to get a mortgage following a period of unemployment. A lender will look at the income, debt-to-income ratio and credit score of the other borrower when they make an assessment.

Of course, you’ll need to co-borrow with someone who has an income and a strong credit score.

A co-signer is another option. They can’t make up for poor credit, but they can help fill in income gaps sometimes.

What Counts As Income?

Most lenders will count regular income payments made to you when determining if you qualify for a mortgage.

• This can include, of course, income from a traditional job, but also many types of government benefits, self-employment, child support and alimony.

• If you own rental properties that income can count.

• Payments if you’re a freelancer count as well.

• Retirement and disability benefits will also count as income in the eyes of a lender.

Sometimes, interest and dividend income, trust income, and capital gains income count.

Things that don’t count as income include what’s not listed on tax returns, illegal income, and projected income. If your income can’t be verified, it won’t be accepted, and capital withdrawals are not usable by lenders.

Overall, you can’t use your unemployment as income to get a mortgage, but there are other options available to you including a co-signer or co-borrower or using other sources of qualifying income.

You also have to be ready to prove anything you’re claiming as income.