Homebuyers without steady employment find it difficult to qualify for a home loan, since most lenders are set up to consider employment, debt ratio and credit rating as the three most important qualifications for a loan. Despite this, if you are willing to look around, you’ll find that there are lenders willing to be flexible on the subject of income. Mortgage brokers are often helpful in tapping into such lenders, although real estate agents may also be able to help you find unconventional financing sources.
Apply for a no-documentation home loan. These are designed to provide home loans to people whose income is difficult to verify. This type of loan works well for people who are self-employed or who have other sources of income that may be hard to prove, since the lender only looks at your credit and the value of the property.
Request a no-ratio loan if you have a lot of assets. In this case, the lender looks at the value of your assets, rather than your income, when deciding whether or not to lend you money. You need excellent credit to qualify for a no-ratio loan, but if you can get one, the interest rate tends to be better than the rate for a no-documentation loan.
Show proof of income from sources other than employment, if you have them. Such sources can include child support, stock dividends, trust fund payments or any other money you receive on a regular and ongoing basis. The lender cares more about your ability to pay the loan than the source of your funds, as long as your income is provable and ongoing. Bank or brokerage statements and tax returns are good sources of proving this type of income.
Get a cosigner to sign on the loan with you. The lender will then consider the cosigner’s income as well as yours when making a loan decision. This can make the difference between getting a home loan and not qualifying, but it is a big risk for the cosigner. If you default on the loan for any reason, the cosigner is liable for the mortgage payments.
Find a house where the owner is willing to carry the loan, meaning you will make payments directly to the owner or an agent for the owner, instead of to a lender. You may be able to get into this type of arrangement by first leasing the home or by offering the owner a large down payment. In this case, the owner is effectively lending you the money by allowing you to make payments which he typically then uses to pay the mortgage. Seek legal help to protect you in this type of arrangement to make sure you will be notified if the owner defaults on paying his lender.
- If you know you will be buying a home in the future, work to get your credit score as high as possible by paying off debts and making payments on time every month. A high credit rating typically means that lenders are more willing to take a chance on you, and you are generally offered a better deal than if you have poor credit. This includes a lower down payment and lower interest rates when you buy your home.
- A no-documentation home loan typically carries an interest rate that is higher than conventional mortgages, so it will end up costing you more in the long run, but may be worth it in some situations.
- Have a real estate lawyer review your documents before you finalize any deals to avoid scams from lenders who prey on people looking for unconventional loans.
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