Was pre-approved, lost my job, can I get a mortgage without it?

22 Replies

Hi folks, 

I have a question: Is it possible to get a mortgage without having  a job? Here's the situation... I work in architecture and used to work construction. I would really like to transition to small-scale, residential community development (buy and hold rehabbing in rougher neighborhoods). I was looking for a 3 or 4-flat and was pre-approved for 300k+. I then got laid off from my job (about 2 months ago, now). I assume my pre-approval is no longer worth anything, but is it possible to still get some kind of mortgage with no current income? 

I'm looking at a small multi-unit that is on sale for about 140k. I have 20% of that for a down-payment and excellent credit (750+). This first property I would ideally move into (owner-occupy) if it works out. Is there any chance I can get a decent mortgage? I was hoping not to have to partner or do private money or anything like that to start (though it is an option). 

Any thoughts on this?

@Brian H. based on what you described above you would need a mortgage type that would be willing to ignore your income. That would mean either you have very strong assets or very strong net worth. The loan terms would look something like a 20 year ARM type of a loan from a smaller bank. There are 30 year fixed rate mortgages that will ignore income if you can show experience/history of rental properties ("showing" meaning your tax returns). Not impossible to get a mortgage but you will be much more limited to the types of loans you will have. Tag me with any other questions on this topic. Thanks!

Lender is going to want to see the last pay stubs and you will be signing papers saying you are still employed . In this day and age I can’t imagine they’d give you a loan if it was revealed .

This is very interesting @Andrew Postell  

My first mortgage lender's appraisal didn't approve with the seller's "as-is" condition. I was shopping for %rates and I assumed because we have a lot of assets and excellent credit the lender would find us a renovation loan (duplex for ~70K), but now I understand that each loan application must qualify for a particular loan package (is that correct?) 

@Brian H. I feel for you... we were in the middle of our investment search and my husband lost his job, and we decided to not make an offer on our first 'find'. It all worked out, he quickly got another job the following week... but I wasn't aware that we could have qualifed without income. Hopefully that will work for your situation. Best of luck! 

Originally posted by @Brian H. :

Hi folks, 

I have a question: Is it possible to get a mortgage without having  a job? Here's the situation... I work in architecture and used to work construction. I would really like to transition to small-scale, residential community development (buy and hold rehabbing in rougher neighborhoods). I was looking for a 3 or 4-flat and was pre-approved for 300k+. I then got laid off from my job (about 2 months ago, now). I assume my pre-approval is no longer worth anything, but is it possible to still get some kind of mortgage with no current income? 

I'm looking at a small multi-unit that is on sale for about 140k. I have 20% of that for a down-payment and excellent credit (750+). This first property I would ideally move into (owner-occupy) if it works out. Is there any chance I can get a decent mortgage? I was hoping not to have to partner or do private money or anything like that to start (though it is an option). 

Any thoughts on this?

 There are "Alt-QM" loans coming online that'll focus entirely on the cashflow of the asset. Typically investment property only (easier to foreclose, less Dodd Frank consumer protection stuff stuff), so not a property you will live in (& if you lie and move in then the term for that is "reverse occupancy fraud"). Like @Andrew Postell hinted at, to compensate for the higher risk will be some combination of a higher rate, higher points/fees, and an adjustable rate. This paragraph is what we call "expectation setting," heh. 

Some will have prepayment penalties, that's something I'd suggest avoiding that way you can refinance once you're back on the job.

Anyone licensed to broker mortgages gets spammed on a daily basis by end-lenders offering these programs, it might not be crazy at all to be upfront with your lender on your expectations re: rate/terms, and tell him to open his spam folder and ask around for which of the spammers balances being reliable when it comes times to actually fund (people spamming me are mostly California only) with rate/terms.... your full blown hard money lenders charging 3 points and 13% to rate with a brutal 3 year prepayment penalty are certainly the most reliable, and the ones promising Fannie-like rates/terms are the least reliable -- they want to get 10 applications into underwriting in order to cherry pick 2 or 3 to actually fund.

Not too sure how you would qualify maybe with a non QM if you could show self employment of some kind maybe.. or maybe try partnering with someone who has w2.

You can get a commercial/portfolio loan if it's an investment property.

The rates and terms won't be as good as conventional Fannie/Freddie loans.

Something like 5-10 year ARM, 20-25 amortization, 6%+ interest.

Thanks for the input everyone. 

@Andrew Postell I certainly don’t have those things (or I’d probably already have figured something out :). 

@Dennis M.  Thanks, I’m certainly not interested in hiding it. Looking for alternatives. 

@Lynne MacFarlane Wish I had closed on something sooner! 

@Michele B. Interested how? 

@Chris Mason Interesting. So they function similar to a commercial loan then? I may ask some folks about this. 

All - I'm actually wondering now if I can swing this with an FHA loan. Don't they allow you to use part of the rent as income? Plus, I could live in it. The price is low and the rents are decent so, it might actually pay for itself depending on what the FHA loan allows one to include.... not sure they would go for my whole repayment income coming form the property itself. I think I can show a history of rents on the property though.

@Melissa Gittens Part time (or self-employed) work and/or partnering is an option, but would rather not if I don’t have to. We’ll see... 

@Dave Skow Trying to avoid the new job! Hahaha. But.... I want to use this saved up money for a DP, not my survival! Was hoping to avoid the co-borrower. Would likely do an LLC instead just for legal reasons.

@Brian Garrett So, I can get a regular commercial loan on it, even if it’s a 4-flat? Those rates would probably work better than hard money and I imagine I could refi after a year or two of rents to show. 

I am interested to see what you need, where it is, do you have any military background or family military background, what LTV you think you need, if you are willing to go with a equity loan, commercial loan, hard money?

I have a million questions ...lol

@Brian H. two months and you don't have a new job in this economy? Who cares if you have a 750 credit score, you have no income. Maybe you want to transition to rehabbing properties, but you have no track record to prove you will succeed. My advice is get a new job and do the rehab as a side hustle. After you have a couple projects under your belt, then you have credentials. I just don't see any lender wanting to work with you in the current situation. 

@Brian H. It would be very challenging for any government backed loan type to give you a loan with no income.  In theory, you would need absolutely no debt.  No student loans, no credit card debt, nothing.  Then your rents would need to cover the mortgage twice over.  So if the mortgage payment (with taxes and insurance) was $2,000 then you would need $4000 in rent.  Without a job, no assets, and no strong net worth, and no history of managing rental properties it is likely you would not have any loan option accessible for you.  Owner financing or private lending would be your only options...and most would ask about those same 3 areas:  assets, net worth, and income to get you in with most of those loan types too.    

I've never had a personal purchase of  real estate that did not have me, at closing, swearing in writing that nothing material had changed and I was still employed. I can't imagine that you would not face that document. Whether the bank proceeds with the loan is up to the bank, but YOU will have to disclose the material change in situation.

Where there's a will there's a way! You have the DP, but no income. I'd say bite the bullet and link up with another investor who has a W2 gig. Live in one of the units and rent out the others. Maybe when you get a new gig, you can buy the other investor out and the property will be all yours. Sometimes we have to modify our dreams to fit our current reality. Well wishes for you and your REI venture!

Sorry for the delay, thanks for all the responses everyone. 

@Brian Garrett I'm investigating that now. 

@Aaron Hunt Rude. But, still, lol. 

@Albert Ng Which risk? A commercial loan? Why would I not? 

@Michele B. No military background. Basically, I just want to get into a property (that's a decent deal) and need a way to finance it that is probably not traditional, but doesn't turn my good deal into a bad one. 

@Joe Splitrock Thanks for the advice. Not always so great at accepting the normal way to do things though, that's why I'm looking for alternatives... 

@Tarik Turner Huh? 

@Andrew Postell I do have debt, though I think I can get rents to cover the mortgage 2x. 

@John Clark Yup, not hiding it. 

@Cassandra Sifford Thanks, that's definitely an option. 

So, I am investigating the feasibility of a commercial loan or seeing if owner financing is an option. However, it does seem like I may end up having to get a job again... blank stare. Ha! I actually have some good options, and am also seeing if I can make a part-time gig work as well. The goal is to be able to spend office hours time on RE and start transitioning to that. I may just have to do the 40 hour week and do this on the side for a few years, but we'll see. I do a lot of community development work / volunteering in my free time and am trying to make my 'job' get out of the way. ;) More to come later!

Stated income loans are loans that do not require Pay Stubs or tax returns. As long as the credit score is above 620 the property appraises out and you are ok with 75% LTV then you can close on this property