If you’re unemployed, getting approved for a mortgage or refinance may be difficult, so it’s important to know your options and how you can improve your borrower profile.

Lenders assess how much risk you pose as a borrower to determine if they will approve you for a mortgage or refinance. This process is known as underwriting. Part of the underwriting process involves the lender examining your income to evaluate how capable you are of repaying the loan. Lenders typically view unemployed borrowers as riskier and more likely to struggle with repaying debt.

However, everyone’s situation is different, and just because you may be in between jobs doesn’t necessarily mean you can’t afford a loan. There also are loan options that don’t require income verification, as well as alternatives to refinancing that can help make your mortgage payments more manageable.

Key Takeaways:


Lender Requirements To Get a Mortgage or Refinance

Lenders will evaluate multiple aspects of your income when you apply for a loan. This includes how stable and predictable your income is, how often you get paid, and whether your current income is higher or lower compared to prior years’ earnings.

Income documentation

When your lender underwrites the loan, it wants to have confidence that you’ll be able to keep up with the monthly payments. You’ll be asked to verify your finances by submitting paperwork. Financial documents you likely will be required to provide include recent pay stubs, W-2s and 1099 forms from the last two years, and income tax returns.

The underwriting process can get a bit trickier if you receive income from unconventional sources, like when you’re self-employed. In this case, lenders likely will request additional documentation.

Credit score

Lenders will look at your credit score to determine what loans you qualify for and how likely you are to repay the loan. In general, a higher credit score will earn you a lower interest rate and better terms.

There are several factors that affect your credit score, including your payment history and your credit utilization ratio.

Late payments reflect negatively on your credit score, and lenders will have less confidence you’ll be able to make loan payments.

Your credit utilization ratio is how much revolving credit you’re currently using. If you rely too much on credit cards, your credit utilization ratio will be high, which indicates to lenders that you’re a risky borrower.

DTI ratio

Lenders will calculate your debt-to-income ratio by dividing your monthly debt obligations by your gross monthly income. There are two types: your front-end DTI ratio and your back-end DTI ratio. The front-end DTI ratio considers your housing expenses, while the back-end DTI ratio considers all your monthly debt obligations. 

DTI ratio requirements vary by loan type and lender, but lenders typically want to see that your front-end DTI ratio is no more than 28%, and your back-end DTI ratio doesn’t exceed 36%. This is known as the 28/36 rule.

Challenges With Getting a Mortgage or Refinancing When You’re Unemployed

If you’re unemployed, getting a mortgage or refinance is more complicated — but not impossible.

One challenge is that you must have a strong borrower profile aside from your employment status. This means lenders may want to see that you have significant savings, a strong investment portfolio, low debt, and a high credit score.

“Your credit score also plays a crucial role,” says Joseph Melara, managing broker at Residential Brokers in Palm Desert, California. “A strong credit history can help compensate for a lack of employment income. You will also need a significant amount of savings or alternative assets to boost your chances.”

If you do get approved for a loan, the lender may offer you a smaller loan amount with a higher interest rate. You also may be expected to make a larger down payment to secure the loan. Putting more money down means you won’t have to borrow as much, which reduces the lender’s risk. 

Factors To Consider Before You Get a Mortgage or Refinance When You’re Unemployed

There are several factors that unemployed borrowers should consider before taking out a loan, including: 

  • You likely will receive a higher interest rate. You should be prepared to receive a worse interest rate because lenders will consider you a high-risk borrower. 
  • You likely will get approved for a lower amount. Since you’re unable to provide proof of stable income, you likely will be offered a lower loan amount when you apply for a mortgage or refinance.
  • You may have to put more money down. If you’re offered a lower loan amount, you may need to come up with more money for a down payment. 
  • Refinancing might not be cost-effective. While refinancing can help make your loan more affordable, it might not turn out to be cost-effective once you factor in the costs of refinancing
Check Out Our Mortgage Refinancing Guide

Tips for Getting a Mortgage or Refinance When You’re Unemployed

Getting or refinancing a mortgage when you’re unemployed is possible, but it’ll likely require more effort. Here are some tips for getting a mortgage or refinance when you’re unemployed.

Talk to a housing counselor

A good place to start is scheduling a consultation with a housing counselor to weigh the pros and cons of refinancing or getting a mortgage when you’re unemployed. These counselors specialize in helping individuals navigate the housing market and real estate transactions, and they likely will be able to provide professional advice for your situation.

The Department of Housing and Urban Development allows you to search for housing counseling services throughout the country. Once you find a suitable agency near you, make an appointment. Be ready to assess your financial situation with a counselor during the meeting, and be aware of any credit issues ahead of time. Together, you may be able to find educational resources or programs that offer financial assistance to help you secure a loan.

Show proof of other reliable income sources

There are alternative income sources you can leverage if you don’t have a job, including:

  • A significant severance package.
  • Rental property income.  
  • Child support payments.
  • Alimony payments.
  • Investment income.
  • Freelance income.
  • Social Security benefits.

Be prepared to provide documentation of these alternative income sources.

Show proof of significant cash reserves

Just because you’re unemployed doesn’t mean you can’t afford a mortgage or refinance. If you have robust savings, or receive a significant inheritance or a lump sum following a divorce, these assets can help you reassure the lender that you’re able to repay a loan. This also can help you afford a larger down payment, which will give the lender more confidence that you’re not a high-risk borrower.

Apply with a co-signer or co-borrower

If you’re unemployed, a co-signer or co-borrower with sufficient income, a high credit score, and a low DTI ratio can improve your borrower profile. 

A co-signer is another individual, like a family member, who has strong finances and agrees to assume financial responsibility for a loan if the primary borrower fails to make payments. If you’re unable to make your monthly mortgage payments, the co-signer will be responsible for your debt. This can help lenders be more confident that you won’t default on the loan.

Similar to a co-signer, a co-borrower can improve your chances of getting approved for a loan when you’re unemployed. However, there are some key differences.

For example, co-borrowers have an ownership stake in the property. When you apply with a co-borrower, two people are applying for the same mortgage, and you both will be responsible for repaying the loan. Co-signers only are responsible if you miss any payments.

Make a large down payment

Lenders are more likely to approve you for a loan if you can make a large down payment. If you save for a larger down payment, you’ll earn a better interest rate and have a lower monthly mortgage payment

Mortgage Options When You’re Unemployed 

Here are some types of mortgages that may be available to borrowers who can’t provide documentation of reliable income. 

Asset depletion mortgage

Asset depletion mortgages can allow borrowers to use substantial assets to qualify for a mortgage instead of employment income. These assets are used as a method of repayment, and serve as collateral in case you default on your mortgage. Assets that qualify for this type of mortgage include savings accounts, certificates of deposit, and investment accounts.

To determine your ability to repay a loan, and to calculate a figure that represents your monthly income, the total amount of your liquid assets is divided by 360 months. Lenders for asset depletion mortgages don’t require you to show proof of regular income or employment, so this could be a potential option if you’re unemployed.

“These options are generally available for borrowers with substantial assets or unique financial situations,” says Sal Dimiceli Jr., a real estate broker at Lake Geneva Area Realty in Lake Geneva, Wisconsin. “They come with different terms and requirements though, so contact lenders who specialize in these types of loans to discuss your eligibility, and the terms it offers.”

No-income-verification mortgage 

No-income-verification mortgages, or no-doc mortgages, don’t require borrowers to submit any income documentation. While no-doc mortgages were a popular option leading up to the 2008 housing crisis, they may be difficult to find today. However, loans marketed as low-doc, flexible documentation, or stated income work similarly in that asset verification is used for borrowers to qualify.

“These mortgages are tougher to come by these days,” says Jeff Rose, a certified financial planner in Carbondale, Illinois. “However, some lenders will be willing to offer them if you have a high credit score and substantial savings. But they will typically come at a higher interest rate.”

Refinance Options When You’re Unemployed 

If you’re unemployed, here are some refinance options that may be available to you. 

FHA streamline refinance 

The Federal Housing Administration streamline refinance is designed to help FHA loan borrowers lower their interest rate, adjust their loan term, and reduce their monthly payment. Lenders don’t need to verify your income, so this can be a potential option if you’re unemployed and struggling to keep up with FHA loan payments.


An interest rate reduction refinance loan, or IRRRL, can help borrowers with Veterans Affairs loans lower their monthly mortgage payment. This streamline refinance option simplifies the underwriting process, and borrowers can forgo income verification.

Alternatives to Refinancing If You’re Unemployed

Unemployment can make affording a monthly mortgage payment more difficult, and borrowers may want to explore refinance options to help them save money. However, refinancing isn’t the only way to save money on your mortgage payments.

Fannie Mae and Freddie Mac Flex Modification program 

The Fannie Mae and Freddie Mac Flex Modification programs can help unemployed borrowers make their loan payments more manageable. Borrowers who have loans backed by Fannie Mae or Freddie Mac and are facing an eligible financial hardship can reduce their risk of foreclosure by permanently modifying their loan. 

Unemployment is among the eligible hardships. However, keep in mind there are additional requirements you must meet, including showing proof that you can afford the modified monthly payments.

Mortgage forbearance

Mortgage forbearance, which pauses or reduces monthly payments, is a common option for those who are struggling financially and need temporary relief. Keep in mind you’ll eventually have to pay your lender back for the reduction or pause, and these later payments may come with a higher interest rate. It also will negatively impact your credit score, so proceed with caution.

FAQ: Can You Get a Mortgage or Refinance When You’re Unemployed?

Here are answers to some frequently asked questions about getting a mortgage or refinancing when you’re unemployed.

Can I get a mortgage loan modification if I’m unemployed?

Traditional loan modification involves adjusting the terms of an existing mortgage to make it more affordable, but lenders typically require income documentation. This makes it an unlikely option if you’re unemployed.
However, you may be eligible for the Fannie Mae or Freddie Mac Flex Modification program, which works similarly to loan modification and can help qualified borrowers who are unemployed.

Can you refinance into an asset depletion mortgage?

Qualified borrowers may be able to refinance their mortgage into an asset depletion mortgage.
You can refinance into an asset depletion mortgage,” Melara says. “This type of mortgage considers your liquid assets, like savings and investments, as income. If you have significant assets but not a traditional job, this can be a great option.”

Can you get a mortgage or refinance if you’re self-employed?

Yes, and in many cases, self-employed borrowers can qualify for a conventional or government-backed loan. Just be prepared to prove your income is steady.
“It may require providing additional documentation to verify your income,” Melara says. “Make sure you have tax returns and profit and loss statements on hand. Lenders will want to see a consistent income history before they will agree to refinance.”

The Bottom Line on Getting a Mortgage or Refinance When You’re Unemployed

Getting approved for a loan when you’re unemployed isn’t easy, but it’s possible — especially if you have significant assets or a qualified co-signer or co-borrower. A good place to start is speaking with a housing counselor, who can help you evaluate the pros and cons of your mortgage and refinance options. Ultimately, only you can decide if getting a mortgage or refinancing is worth the potential costs, or if you’d be better off waiting until your employment status is more stable.