Buying a home can be tricky if you’re not currently employed. When you apply for a loan, your mortgage lender will want to know that you can maintain a steady income. Starting the loan process before you’ve started your new job may therefore raise a few eyebrows. That being said, it’s not impossible to qualify for a home loan even if you’re in between jobs.
What a Mortgage Lender Is Looking For
Before shelling out the money for a loan, mortgage providers want to make certain that you’ll have enough income to cover each month’s payments, and that includes everything from the principal, to the interest, to the insurance coverage. To be on the safe side, most mortgage brokers would like your loan payments to constitute no more than 28 percent of your gross income each month. When you throw in credit cards and student loans, the total debt burden should hover somewhere around 36 percent.
Steady Employment Means Steady Income
Providing evidence that you’ve secured a well-paying job may not be enough to qualify for a loan. You’ll also need to demonstrate that you can remain in that job for the foreseeable future. Most lenders figure the best way to determine that is by looking over your work history. Ideally, they want to see that you’ve been employed in a job with a steady or increasing income for at least two years.
Any and all employment gaps will therefore bring increased scrutiny. They may even be cause for denying your application altogether. Switching jobs right before applying for a mortgage can also complicate the process and raise doubts about your financial stability. All of which is why experts typically advise potential homebuyers to stay in their current job during the application process.
Of course, life happens. Sometimes you need to relocate in order to start your new career, and that means applying for a loan while you’re in between jobs. So, what are your chances of securing a mortgage in that event?
Calculating Your Chance of Success
Your chances of qualifying for a home loan depend largely on why you’re in between jobs and what type of job you have lined up. If you’ve been laid off recently or are currently looking for work in a completely different industry, your mortgage provider may question your ability to maintain steady employment.
If, on the other hand, you’re simply advancing your career and stepping up into a higher paying position, they will be more confident in your ability to make your monthly payments. Even a job in the same field that offers similar pay can help your case. By moving either vertically or laterally within the same industry, you show that you’re not just flitting from odd job to odd job and living from unstable paycheck to unstable paycheck.
Bringing in a Co-Investor
What if your new job is a step down from your last job? What if you decide to change career paths entirely? What if you can’t explain away those employment gaps? Rather than hang your head in defeat, try thinking creatively. One way to convince a mortgage broker that they’re making a safe bet is by bringing in another party to help cover the costs.
Ask a friend, spouse, sibling, or partner with a better work history to come in as a co-borrower, and you’ll increase your chances of qualifying for a mortgage. More often than not, you would be living in the house together, so make sure you choose someone with whom you actually enjoy spending time.
If you have any additional sources of income, be sure to list them on your application. Anything from investments, to trust funds, to Social Security benefits can impress a lender and lessen the impact of an unstable work history. However, the same rule applies to non-traditional income as to job-based income: It must have been steady for at least two years. You should also be able to prove that it will continue paying out for at least a few more years.
A and N Mortgage Can Help
If you’re currently in between jobs and looking to purchase a home, contact A and N Mortgage at (773) 305-LOAN. We can help you sort through your options and determine if you pre-approve for a mortgage.