What Can You Use The Funds From A Home Equity Loan For
Home equity loans are similar to personal loans in that they can be used for just about anything, including consolidating high-interest debt and paying for living expenses. But it’s a good idea to think twice in most cases, because you could lose your home if you default. Many experts recommend only using home equity loans for home repairs and upgrades, since that will increase your home’s value.
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No Job Can’t Refinance How To Talk To Your Bank
Homeowners who have recently lost their job are caught in a “no man’s land” where they are struggling to make their mortgage payments but can’t get help from either their lender or the government.
Peggy Shaw had been thinking about refinancing her Decatur, Georgia condo before she was laid off as a senior editor at a book publishing company last Thanksgiving. She has a $1,295 monthly mortgage payment and says she’s barely keeping her head above water.
“I’m scared and I try to take it one day at a time,” says Shaw, who is divorced with a son and daughter in college. “When I got laid off, I went to the bank to see if I could get my mortgage refinanced.”
But Shaw says she was told that because she did not have a job, she couldn’t refinance. The bank told her to keep checking back with them, which she had done.
Shaw isn’t alone. More and more homeowners who suddenly lose their jobs are facing the scary realization that they can’t pay their mortgage anymore. Many can’t get the bank to refinance and they don’t qualify for help under the new Obama mortgage rescue plan.
“Unfortunately, there’s not much that they can do,” says Edward Mermelstein, managing partner of Edward Mermelstein Development, who works with clients in residential and commercial real estate. “If you don’t have income and are out of a job, you are very much limited as to what you can propose to the bank for refinancing.”
What You Can Do
Bank’s Motivation
Are There Any Fees Associated With Unemployment Loans
Personal loans taken out during unemployment can absolutely carry fees. Whether and which fees apply will depend on the lender. Common fees you could face include origination fees, late fees, and prepayment penalties.
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Unemployment Income And Mortgages
If youre currently receiving unemployment benefits, your lender most likely wont be able to use your unemployment income towards qualifying for a home loan.
The reason? It comes down to the way lenders calculate and verify income.
The basic mortgage standard is this: Lenders are required to document at least two years of verifiable income from a steady source.
Your lender must also determine that the source of income is likely to continue into the future, typically for at least three years.
In order to document the past 24 months, home buyers usually need to provide several documents:
- The last two years W2 forms
- If self-employed, the last two years income tax returns
- Bank statements
Someone whos newly unemployed might have a steady work history. And they might have the savings required for a down payment.
But a lender wont be able to verify their future income.
In fact, the maximum amount of time most states allow someone to be eligible for unemployment benefits is 26 weeks at a time. Thats six months, not three years.
For these reasons, unemployment income can be used for everyday expenses. But it cannot be counted when qualifying for a new mortgage.
Check Your Eligibility For A Streamline Refinance
Most refinance options require you to document adequate income, but there are exceptions.
The FHA Streamline Refinance is ideal for homeowners who already have an FHA loan and want to reduce their payment by extending their loan term.
The FHA Streamline is a low documentation loan, so it does not always require income verification. You may be required to prove you are still working, but the income from that job need not be verified.
And no home appraisal will be required, either. If the home has lost value, the lender can still approve your refinance.
USDA- and VA-guaranteed loans also offer similar Streamline Refinance programs.
The VA Streamline Refinance does not need an appraisal or income verification. And you dont need to show your bank account balances.
These loans are available to just about any homeowner who currently has a VA loan. VA rates are lower than conventional loan rates, so savings could be substantial. Check with any VA-approved lender even if you are unsure whether your current loan is VA-backed.
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How Can You Refinance Your Mortgage If You Are Unemployed
Related Articles
Refinancing your mortgage while unemployed is a challenge. When you refinance a mortgage, you are paying off your old mortgage and negotiating a new one. This includes passing all the credit checks needed for a new mortgage these checks have gotten stricter since the housing crisis that began in 2008. To refinance your mortgage you must be up-to-date with your payments and be able to prove you have the income or savings to justify a lender investing in you. A more accessible route for unemployed homeowners is to try for a loan modification. Without a steady income, your chances of a mortgage refinance are slim.
You Can Refinance In The Future
Rates right now are fairly high. While the national average on a 30-year, fixed-rate mortgage has fallen back below 7% this number is still far higher than the mortgage interest rates we saw at the beginning of 2022, prior to the Feds rate hikes that started in March.
However, we can expect these rates to go back down if the Fed is successful in using them to lower inflation. The Fed has indicated that it intends to raise rates throughout 2023, but after this, there may be the potential to refinance at lower rates.
Recommended Reading: How Do I Cash My Unemployment Check
Whats The Difference Between Part
Having part-time employment and receiving income from seasonal work might sound like the same thing because youre only working the job for part of the time, either based on the number of hours or times of the year. However, for the purposes of mortgage qualification, there can be a big difference.
A part-time job is defined as work you do for an employer throughout the year that happens to be less than a full-time, 40-hour work week. You can qualify for a mortgage with part-time work because the likelihood of receiving continuous income is high.
Seasonal workers do jobs that are only done at certain times of the year. For instance, if you provide seasonal help with farming or logging, or if you work at a retailer during the holiday rush, thats seasonal work. Its also seasonal work if youre a mall Santa or Easter bunny.
This is being written in the fall, so it seems appropriate to mention that work at haunted houses or cider mills counts. The key difference is that part-time work can be done year-round and seasonal work is only done at certain times.
Its Possible But Its Not Always A Good Idea
Image Source RF / Cadalpe / Getty Images
Lenders are looking for a solid investment when they approve a mortgage, which is why youll face rigorous documentation requirements and stringent income checks after applying for one. So, can you even get a mortgage without a job? The answer is yes, but youll have to meet other criteria for this to work.
Lets take a look at how to get a mortgage without a job, what it looks like when shopping for one, and the downsides to acquiring a mortgage while unemployed.
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If I Refinance Can I Have A Co
You know how retail stores often offer deals to people who take out a new credit card deals that loyal customers who already have the card do not get? Well, the same thing happens if you bought a home when interest rates were high, and then they drop. New buyers could actually be getting a better deal than you got. With a mortgage, you have a chance at getting the deal, though, which you typically dont at the retail store. You can refinance your mortgage to get the low interest rate if you qualify. The problem is if you dont have an income you probably wont qualify. Dont give up, however, because you just might be able to refinance even without income.
Can I Take Out A Personal Loan While Unemployed
Were here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey.Read moreWe develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide.We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right.Read less
From unemployment benefits to hardship programs, there are a number of options out there when it comes to managing money during difficult times. One option that people may consider during unemployment is a personal loan. But one important question is: Can you get a loan while unemployed?
While there are personal loans for the unemployed available, its important to carefully assess the downsides and the benefits before moving forward. Youll need to ensure youll be able to pay back the loan even if money gets tighter, and you should also be prepared for a more challenging approval process.
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Do Not Consider Conventional Financing
In order to qualify for a mortgage refinance when you do not have a job you have to think outside of the box. Will you qualify for conventional financing? The answer is likely no, you will not. Conventional financing requires very strict standards and obliges the lender to ensure that the loan meets the Ability to Repay Rules. These rules state that the lender put forth a good faith effort to determine that the borrowers income, employment, credit history and assets all point to the fact that the borrower can effectively afford the loan. If the borrower does not have a job, that likelihood is pretty much tossed out the window.
Mortgage After Unemployment And Employment Gaps
This Article Is About Mortgage After Unemployment And Employment Gaps
Qualifying For A Home Mortgage After Unemployment And Employment Gaps:
- Many mortgage loan applicants assume they automatically need two years of continuous employment history in order to qualify for a mortgage loan
- This is not true
- You can have one or more gaps in employment in the past 24 months and qualify for a home mortgage
- Per agency mortgage guidelines of FHA, VA, USDA, Fannie Mae, Freddie Mac, borrowers can qualify for an owner-occupant primary home loan with gaps in employment in the past 24 months
- However, many lenders may have tougher guidelines when it comes to gaps in employment in the past two years
- All mortgage lenders need to follow the minimum agency mortgage guidelines of the loan program
- However, lenders can have higher lending guidelines that are above and beyond of the minimum agency mortgage guidelines called lender overlays
- Therefore, some lenders may tell you that you do not qualify for a mortgage if you have not been employed with the same employer for the past two years
- This employer has its own lender overlays on employment gaps
- Gustan Cho Associates is a national mortgage company with no lender overlays on employment gaps
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Qualifying For A Refinance When Youve Lost Income
The refinancing lender will need to appraise your home to see if your loan meets loan-to-value limits. It will also check your debt-to-income ratio and credit history.
So keep your credit score as high as possible by making all your minimum payments for debts like credit cards, auto payments, and, of course, your mortgage.
This is tough when money is tight, but it can make a difference in making you a more appealing candidate for most types of mortgage refinances.
Talk to your other creditors, too. Some may let you delay payments without giving you an official late payment on your credit report.
Can I Defer Payments Or Refinance My Mortgage
You cannot defer payments if your mortgage is up for renewal this would require disclosing that you lost your job and makes it unlikely that you will get your mortgage renewed. But if you are in the middle of your term, this is an option to ease your financial burden.
If you’re calling the lender before you have that deferral situation, they’re more likely to play ball with you because they want to help you, says Zlatkin. They don’t want to foreclose on you.
Refinancing your mortgage is much trickier because its similar to applying for a new mortgage. Axess, a Canadian mortgage law firm, suggests taking a hard look at your finances and credit score, and assembling any possible sources of income to show that you could make the payments.
However, without a job, you may have to face the possibility of waiting until you can provide proof of financial income.
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How Does A No
Also known as a no doc mortgage or a stated income loan, a no-income verification refinance is a loan program that does not require mortgage lenders to verify a borrowers income through traditional channels like tax returns or W-2s.
Instead of providing lenders with tax returns, bank statements, pay stubs, W-2 forms, or other income documentation, these loans use factors such as home equity, available assets, and general cash flow to determine eligibility.
There are several types of no-income verification mortgages, or no doc loans, and each have their own set of guidelines.
Cook All Of Your Own Meals
Cooking every meal you consume at home this month instead of dining out or ordering takeout could save you $100 or a lot more, depending on your habits. But if you commonly dine out or order in once a week, replacing those meals with home-cooked ones could leave you $100 richer at the end of January.
Furthermore, cooking more could give you an opportunity to experiment with new recipes and discover foods you love. And if you made a New Year’s resolution to eat healthier, skipping restaurant meals and takeout could lend to that goal.
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Consult A Housing Counselor
If youre not sure where to start, a great first step is to speak with a professional about what is needed to get or refinance your loan. The U.S. Department of Housing and Urban Development offers a list of free or low-cost counseling services available where you live.
HUD can help you put a budget together, clean up your credit if you need to, or help you find the right government-backed loans Federal Housing Administration loans for low-income borrowers or those with shaky credit, Department of Veterans Affairs loans for our nations military and veterans or U.S. Department of Agriculture loans for rural homes.
Theyll also be able to explain the many different types of mortgages available to home buyers. Plus, they may be able to help you work through different alternatives to find a way to refinance your home.
Refinancing A Mortgage Without A Job Is Almost Impossible: Three Potential Solutions
Updated: by Financial Samurai
Refinancing a mortgage without a job is brutally difficult. Once you lose your stable W2 income, you become dead to banks. Please refinance your mortgage before quitting or negotiating a severance please!
Once you leave your day job, you become dead to banks. Lenders need to see at least two years of qualified income to even consider lending to you.
Ive been fortunate over the past 20 years to refinance multiple properties, multiple times. Economic Armageddon and easy monetary policy by the Fed is literally saving me hundreds of thousands of dollars in interest expense.
To experience a recovery in stocks and real estate while also being able to lower my mortgage is amazing. However, things are much dicier now. Let me share a mortgage refinance experience without a job several years ago. Ill teach you how to refinance a mortgage without a job.
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