FHA Loan After Unemployed

4 Replies

Looking to get an FHA loan sometime next year to buy a multifamily in the DC area. A problem is that this entire year I have not had a job, but I have been collecting unemployment. I have W2s from 2018, and 2019, and I was wondering how badly would it affect my mortgage application being out of work for an entire year?

I understand that lenders look at rental income and and take account about 75% of the rent, and because I’m looking to get a 3-4 unit does this make my case any better though I’ve had this huge gap in employment?

An FHA loan is going to be significantly more difficult to obtain without a W2 or constant income. Unless you have a large downpayment and outstanding credit it will be difficult but not impossible. If you can prove to a lender by some other source of income that you can make a monthly payment you have better chances of procuring that loan.

I would also keep in mind that sellers don't usually favor buyers with FHA loans over conventional loans, especially in a hot market with plenty of cash buyers.

You will need to ask yourself a couple of questions in order to get the ball rolling on a potential purchase. 

Such as:

What is my debt to income ratio? (Preferably under 35%)

What is my credit and how can I improve it? (As of 2020 your FICO must be 580 or higher)

How will I procure the income to make the monthly payment?

Good luck!

They will usually average your last 2 years' income and unemployment income unfortunately is excluded. This may lower the amount they will lend you. I have had that problem myself. Once steady earnest income starts to flow in, and your credit is established your lender will be more likely to approve you. 

I hope this helped!