To qualify for a mortgage loan you must first convince lenders that you can afford to make the monthly payments that come with it. It’s little surprise that this is much more difficult if you’re currently unemployed.
It’s not impossible, though.
Mortgage lenders rely on several factors when determining who qualifies for a loan. Your debt-to-income ratio is one of the most important. Most lenders want your total monthly debts, including your new mortgage payments, to equal no more than 36 percent of your gross monthly income. If you are unemployed and don’t have a steady stream of income coming in from a full-time job, it will be more difficult to get your debt-to-income ratio under this figure.
But maybe you’re a special case. Maybe you have enough income from other sources so that your debt-to-income ratio is under 36 percent even without a job. This can happen if you receive rent payments from several tenants. If can happen if you receive royalties on a regular basis. It might even happen if you receive regular payments because of a legal dispute.
Remember, lenders consider all regular monthly income, not just dollars from a job. So such income as Social Security payments, disability payments, unemployment checks and alimony payments all qualify as income.
It helps, too, to have a strong credit score. Most lenders consider three-digit FICO scores of 740 or higher to be excellent ones. Such a score shows that you have a history of paying your bills on time. Lenders will be more willing to give unemployed borrowers a mortgage loan if they have a strong credit score.
There’s another issue here that has happened all too frequently as of late: What if you become unemployed after taking out a mortgage loan and, because of this, you can no longer afford your monthly payments?
Your best bet in such a case is to immediately notify your lender. Your lender might be willing to provide you some relief, such as lowering your interest rate or providing you with a three- to six-month break from making your payments. Some might even forgive a portion of your loan, leaving you with both a lower balance and lower monthly payments. But if you don’t call your lender, you’ll never find out if such relief is available.