Emergency Homeowners Loan Programs
The world, and the government, understand that things go wrong. People get fired, or laid off, all the time and programs for assistance have been created to help when people lose their jobs.
If you are unemployed because you got fired or laid off, you might qualify for the Home Affordable Unemployment Program . This program can give people a break from paying their mortgage, or at least lowering their monthly payments, for typically 12 months. It can go for longer if necessary, but will require a re-evaluation.
The best way to utilize this program is to start the process right after you lose your job. It begins with a three month forbearance period, where the max payment you make on the home is 31 percent of your pre-tax household income. Its essential to make these payments on time and in full to continue with the program. Then, before the end of the three months, your mortgage company will send an application for a more permanent modification to your loan until you find a job.
Be warned though; you can only file for a HAMP once on a mortgage. If you file for one, get a job and get off the program, then lose your job later, you cant re-apply for it. So if you think you can get a new job quickly, hold off on applying for a HAMP.
A Final Solution For Refinancing A Mortgage Without A Job
I ended up reaching out to my personal banker to follow up with another Citibank mortgage officer about this deal. This person followed up, checked my documents, looked up my credit score and my payment profile. The result? No refinance for me.
Without a W2 income, it doesnt matter whether I have more liquid assets in the bank than the size of my mortgage, my monthly debt payment to income ratio was over 40%.
Citibank and other banks have a strict 40-45% D/E ratio that cannot be crossed nowadays. In the good old days youd have folks coming in with stated income to allow them to borrow. In the new environment, banks check everything down to the last penny.
The interesting thing is that 44% of my mortgage payment is principal, but the bank still included my total payment as part of my debt rather than just the interest portion.
Given I had low expectations, I wasnt disappointed because I know the unemployed are dead to banks. I also didnt want to potentially go through a 100 day mortgage refinance ordeal again like I did last Spring for 0.25%.
It sucks not to be able to save additional money, but what can I do except go back to work? In fact, thats exactly what my mortgage officer somewhay smugly told me.
Sorry we cannot go through with the refinance.;Thanks Sam for your understanding! Im sure were hiring. Check our career section, Ill put a good word in for you. said the mortgage officer.
Why So Many Lenders Have Lender Overlays On Gaps In Employment
Many lenders have lender overlays on gaps in employment and will require borrowers be employed with the same company for the past two years. Although FHA, VA, USDA, FANNIE MAE, FREDDIE MAC allow borrowers to have had multiple jobs and/or employment gaps in the past two years, many lenders think if a borrower did not have the same job in the past two years that they do not have employment stability and poses risk for the lender. Therefore, even though agency guidelines state otherwise, many lenders have lender overlays on employment gaps and multiple jobs in the past 24 months.
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Be Careful With Bonus Or Commission Income
Kyle Dickmann, president of Denver’s Dickmann Taxx Group, says that borrowers need to be cautious about taking on new jobs in which a large portion of their yearly salary will be made up of bonuses or commissions that can rise or fall. Lenders are more nervous about income that isn’t as steady as a traditional salary.
“The two-year job history is actually a bit overstated,” Dickmann said. “The bigger issue is how much of your paycheck is a fixed amount, like a salary, and how much is commissions or a bonus.”
Dickmann knows this. When he was a young attorney, he applied for both a mortgage and car loan without realizing that a large portion of his earnings included bonuses. His lender turned down his application for a mortgage, while his auto lender stuck him with a high interest rate.
The good news? If you can prove that your bonus or commission income is stable, lenders will accept it. This, though, requires time, and time isn’t something applicants have when they take on a new commission-heavy job just weeks or months before applying for a mortgage.
Dickmann, for instance, had to wait six months to show the bank that his bonus income was stable, and he had to prove this by showing his lender those six months’ worth of paycheck stubs.
“While job history is important, my experience has been that establishing stability in income can easily overcome the two-year job history limitation,” Dickmann said.
Can You Get A Home Equity Loan If You Are Unemployed
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If you own a home and have home equity you can get a home equity loan even without a job. Home equity lenders primary focus is your homes equity. Many times, people starting a new business, new Canadians or temporary job loss can leave home owners without conventional income to qualify under.
Secondly, do you need income to get a home equity loan? Requirements for borrowing against home equity vary by lender, but these standards are typical: Equity in your home of at least 15% to 20% of its value, which is determined by an appraisal. Debt-to-income ratio of 43%, or possibly up to 50% Credit score of 620 or higher.
Similarly one may ask, can I borrow money if I am unemployed?
It can be harder to get a cash loan if you’re unemployed, but it is possible. If you can‘t provide proof of income, lenders are less likely to offer you a cash loan. The best loan terms and rates are often reserved for customers with a good credit history, and for those in employment.
How can I get a loan with no job and bad credit?
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Should You Downsize Your Home
A mortgage is a serious financial commitment, and if you are afraid you wont be able to meet it because of unemployment, maybe you need to get out of it. Instead of draining your savings and risking foreclosure, consider selling your home and downsizing to something more financially manageable.
This could mean getting a smaller home, moving to an apartment, or living with family. That way, you dont completely destroy your savings or risk declare bankruptcy and going through foreclosure.
Can I Get A Mortgage On Unemployment
Bad news first. If you were recently laid off you cant count unemployment benefits as income for a mortgage application.
But dont give up on your home buying plans just yet.;
Its possible to buy a house or refinance very soon after returning to work or even before you start a new job if you have a strong offer letter.;
If you keep your finances in order while unemployed, this brief period out of work shouldnt stop you from buying a house or refinancing once youre back on your feet.
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What Type Of Seasonal Income Cant Be Used For Mortgage Loan Qualification
When it comes to mortgage qualification, the thing thats going to matter the most is consistency. Mortgage lenders want to be able to have reasonable assurance that you are going to continue receiving that income. For that reason, having one regular employer is helpful rather than several jobs you do during one season of the year.
As an example, lets say during the summer you work part-time for a landscaping service. You also worked part-time as a hot dog vendor on the street. In order to use both jobs for mortgage qualifying income, you have to work both jobs for at least the past two summers. If you only started working at the hot dog stand this past year, the work history isnt long enough to use that income.
We hope this has helped clarify the process of qualifying for a home loan with seasonal income. If youre ready to get started, you can apply online.
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To Start Verify Your Mortgage Type
The kind of mortgage you have may determine what types of assistance are available to you.
The GSEs, Fannie Mae and Freddie Mac, deal with conventional loans.
The Federal Housing Administration insures FHA loans.
The Department of Veterans Affairs guarantees VA loans.
The Department of Agriculture offers USDA loans.
To verify whether you have an FHA, VA or USDA loan, find your closing documents and look for the Closing Disclosure. In the upper right of the first page of this document, under “Loan Information,” you’ll see checkboxes indicating your loan type: conventional, FHA, VA or other.
If you can’t locate this document, try looking at your monthly mortgage statement or contacting your lender at the phone number listed on the statement.
Regardless of mortgage type, contact your lender to discuss relief options. The federal government has encouraged all lenders to support homeowners who need mortgage assistance due to hardship brought about by the coronavirus pandemic.
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Should I Refinance My Mortgage During The Coronavirus Crisis
by Maurie Backman | April 13, 2020
Many or all of the products here are from our partners. We may earn a commission from offers on this page. Its how we make money. But our editorial integrity ensures our experts opinions arent influenced by compensation. Terms may apply to offers listed on this page.
Homeowners have been clamoring to refinance. Should you do the same?
The COVID-19 crisis has been battering the U.S. economy for almost a month now, and many Americans are feeling the pain, homeowners included. In fact, many are reaching out to their lenders and asking to put their mortgages into forbearance, thereby pausing payments for a period of time as they attempt to stretch their limited income.;
While the current economic climate isn’t great, there may be one glimmer of positivity for homeowners looking to lower their housing costs on a long-term basis. Today’s mortgage rates are extremely competitive, which means it may actually be a good time to refinance — despite the general economic turmoil. The question is: Is refinancing a mortgage a smart move for you right now?
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What Happens If You Cancel Your Loan Application
For some applicants, the strategies above may not have a positive impact on their loan application. If you find yourself in this camp, you have the option to cancel your loan application. While cancellation might be your last resort, it can save valuable time and legwork for both you and your prospective lender.
If youre thinking about canceling your application, you may wonder what consequences there may be. The good news is your mortgage application is not a binding contract. Youre free to cancel at any time. However, not all application-related fees are refundable. Depending on your lender’s policies and the timing of your cancellation, you may face one or more of the following:
What Is An Fha Streamline Refinance
An FHA streamline refinance;is when you replace your existing FHA loan;with a new one without having to provide the same level of documentation or go through the same amount of underwriting scrutiny that another type of loan would require. While you can refinance with your existing lender, its not a requirement. Shop around to find the best interest rate and closing costs.
The two types;of FHA streamline refinance are credit qualifying and non-credit qualifying. Neither requires a home appraisal. The credit-qualifying refinance requires the lender to review your , credit history and ability to repay the loan; the non-credit-qualifying refinance does not.
Have your finances improved since you took out your existing loan? The credit-qualifying version may be worth the extra steps if it would help you get a lower interest rate. And youll need to choose this option if youre removing a borrower from the mortgage, because the lender will want to make sure the remaining borrower can still pay the loan.
Have your finances gotten worse since you took out your current loan? A streamline refinance could be a lifeline by lowering your monthly payment and helping you avoid foreclosure.
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How To Qualify For An Enterprise Refinance Loan
If you’re interested in applying, there are some basic things to know. First, Freddie Mac and Fannie Mae have different names for the program. Freddie calls its enterprise-backed mortgages “Refi Possible“; Fannie’s name for the same program is “RefiNow“.
Second, you’ll need to find out if your specific mortgage is backed by Fannie Mae or Freddie Mac. For Fannie Mae, you can search for your loan on their website; for Freddie Mac, you can use the loan lookup tool on their site.
Third, to be eligible for the programs you’ll need to meet a few different requirements:
- You must have a FICO credit score of at least 620.
- You need to earn at or below 80% of your area’s median income.
- You’ll need to provide proof that you’ve been current on mortgage payments for the past six months in a row.
- You haven’t missed more than one mortgage payment in the past 12 months.
- Have a maximum mortgage loan-to-value ratio of 95% or 97% depending on the property type.
- Your debt-to-income ratio must be 65% or lower.
Getting The Straight Answer On Being Able To Qualify For A Mortgage With Having Multiple Jobs And Employment Gaps In The Past 24 Months
Remember that all lenders need to meet the minimum agency mortgage guidelines of FHA, VA, USDA, FANNIE MAE, FREDDIE MAC.
- However, lenders can have higher lending standards of their own called lender overlays
- Therefore, not all lenders have the same lending requirements on government and/or conventional loans
- This is where many borrowers may get conflicting answers to questions asked
- Borrowers should study the basic agency mortgage guidelines before shopping for a mortgage
- This way, they will know if they meet the minimum agency guidelines of the loan program they are applying
- If they are told they do not qualify, borrowers will know whether they do not meet the minimum agency guidelines or they do not qualify with the individual lender due to their overlays
Gustan Cho Associates has no lender overlays on government and/or conventional loans.
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Is Now The Right Time To Refinance
What’s the one benefit of refinancing today? The relatively low rates we just talked about. But there’s also a downside to refinancing: Just as you pay closing costs to finalize a regular mortgage, so too do closing costs apply when you refinance. As such, you’ll need to make sure you plan to be in your home long enough to make refinancing worth it.;
If you spend $2,400 on closing costs and, in doing so, shave $120 off the cost of your monthly mortgage payment, then you won’t break even for 20 months. That’s fine if you have no plans to sell your home for the next few years, but if you’re expanding your family and expect to need a larger place sooner, then refinancing may not pay off.
Another thing: If you’re going to refinance, you’ll need to make sure you’re in good shape to qualify. That means having strong credit and a steady source of income — something many Americans, unfortunately, can’t claim right now. Unemployment benefits aren’t considered a steady source of income for mortgage application and refinancing purposes, so if you’re out of a job and are receiving a weekly benefit, that won’t help your case.
Also, prepare for what could be a drawn-out process. After mortgage lenders got overwhelmed with refinance applications in March, some are hitting the brakes on accepting new ones while they work through existing backlogs. If you’re serious about refinancing, shopping around is your best bet. You’ll probably need to exercise a fair amount of patience as well.
The Exception: Seasonal Workers And Contractors May Be Able To Buy A House On Unemployment
For seasonal jobs such as landscaping and construction, its possible for lenders to document unemployment income when you apply for a home loan.;
Thats because these professions may have a history of regular income from unemployment during their off seasons.;
Heres an example: Seasonal workers generally do a job, the job is completed, and then theyre laid off. When a new project comes up, theyre re-hired.
During the time between projects, the seasonal worker applies for and receives short-term unemployment income.;
In this instance, their seasonal unemployment income may be used for mortgage qualifying.;
However, it must still adhere to the two-year history rule. If a seasonal worker can document they received jobless payments consistently for at least two years, this may be considered when applying for a mortgage.;
Theres one important caveat worth noting.;
Unemployment compensation;cannot;be used to qualify the borrower unless it is clearly associated with seasonal employment that is reported on the borrowers signed federal income tax returns.;
And, the lender must verify that the seasonal income is likely to continue.
Additional considerations for unemployment income
Second only to your credit score, your income plays a major role in the home loan process.
Even though unemployment income may be averaged and counted towards a mortgage qualification in rare cases, there are some important points to remember.
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