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Love them or hate them — most of us need a job. If you’re unemployed or self-employed you may face a bit of an uphill battle when it comes time to apply for a mortgage. Even if you have enough money saved or generate plenty of income from your own business, some lenders will look at you as a risky bet and make it harder to qualify for their lending products. 

Read on for insight into how to buy a house without a job and how to improve your odds of mortgage approval.

Why having a job matters to mortgage lenders 

When it comes time to buy a home, most of us need a mortgage to help bridge the gap between the down payment and sale price of the home. If you don’t have a job you will face more challenges when it comes time to apply for a mortgage — even if you have income coming in as someone who is self-employed. 

Mortgage lenders typically like to see a couple years’ worth of W-2s and employment verification when they review mortgage applicants. The more stably employed an applicant appears to be, the less risk they feel they’re taking on. 

All of that being said, it’s still possible to get your hands on a mortgage even if you don’t have a full-time job that generates a consistent income. 

Home buying options for buyers without a job 

If you don’t have a job and are thinking of buying a home, it’s understandable that you may lay awake at night with one thought on your mind: Can you buy a house without a job? 

It is often more challenging to buy a home when you don’t have a job, but it’s not impossible. These are a few steps you can take to make it easier to get your hands on a mortgage, even if lenders aren’t impressed with your current employment situation.

Work with a housing counselor

Under the best of circumstances it’s hard to navigate the home buying process. If you’re at a disadvantage, you may find that working with a housing counselor is a good way to map out a plan to obtain a mortgage. 

The U.S. Department of Housing and Urban Development (HUD) can point you in the direction of low-cost or free housing counseling services in your area. Connect with one of these housing counselors to learn more about what you can do to better your odds of getting a mortgage. They may help you create a plan to improve your credit or point you in the direction of a type of home loan you’re more likely to qualify for. Some government-backed loans like FHA, VA, or USDA loans are easier to qualify for than ones backed by banks or mortgage lenders. 

Highlight your savings

Chances are, if you want to buy a home when you don’t have a job, you have a decent amount of money in the bank. If you pull together a large down payment amount and show you have savings to put towards future mortgage payments, the lender will feel a bit more at ease about lending money to you.  

Asset-based loans

In conjunction with leading with your savings, you can also consider pursuing asset-based lending if you’re currently living off your assets (as many retirees do). With an asset-based loan, such as an asset depletion mortgage, you borrow money based on your verified assets, such as investment accounts and money market accounts. 

Get a co-signer

A co-signer is an individual who agrees to make your mortgage payments if you fail to do so. If you are unemployed or self-employed, having a co-signer with a stable employment history and a good credit score gives your lender some much needed peace of mind that someone will make your mortgage payments each month. If both you and your co-signer fail to make a payment, they risk damaging their credit score, so your co-signer has motivation to not let a payment go unpaid. Parents and other family members often act as co-signers. It’s important that your co-signer understands the risk they’re taking on and that you have a plan to make your payments on time each month.

Be upfront with your lender

There’s no point in trying to hide your employment status and history from potential lenders, so it’s best to be upfront from the beginning about your situation. Consult different lenders on what mortgage options they have for borrowers who are unemployed or self-employed. They may be able to connect you to a program that has more lenient lending requirements like a mortgage program for first-time home buyers. 

Show a solid work history

If you work for yourself some lenders may still view you as not having a job. Fair? No. But this does happen so it’s important to prepare accordingly. If you have consistent clients or revenue sources that regularly lead to income coming into your account, show your lender that. 

Pay down debt and improve your credit

If you don’t have a job, it may take some time to find a mortgage lender willing to work with you. In the meantime you can pay down debt and improve your credit score. That way, lenders will see a history of you being able to repay your debts and make payments on time. 

Buy your next home without rushing to sell first

Orchard takes care of selling your home once you’re all moved out.

What if you just got a new job?

If you’ve just begun a new job, it’s a bit hit-or-miss how lenders will view your new employment opportunity. More often than not, lenders like to see a two-year work history at the same company or within the same industry. Once you have a job though, lenders do view your job as permanent and ongoing which works in your favor. 

If you only had a brief employment gap after a long history of steady employment, you’ll likely find a lender who won’t hold that against you. Again, responses to this situation may vary, which is why it’s important to shop around for the right mortgage loan. You can prequalify for a loan with more than one lender to get an idea of what loan amount each lender is likely to approve you for. Then you can focus on applying for mortgages with the lenders who are more likely to give you a favorable loan amount and interest rate.

What to keep in mind before buying a home

If you are currently unemployed or lack a consistent source of income, it’s important that you plan carefully before you make the leap into homeownership. Buying a home is a big responsibility and will majorly impact your finances. 

Sit down and budget carefully to see how much you can afford to spend on not just a mortgage each month, but the many other costs of homeownership like utilities, property taxes, and maintenance. It’s also a good idea to save up for a few extra months of these costs in case you struggle to find work or your self-employed income takes a dip. 

Buying a home and securing a mortgage without a job is doable, but it takes a lot of planning and research to make it happen. Take your time here. The last thing you want to do is end up with a mortgage you can’t afford to make payments on.

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