REFINANCING YOUR MORTGAGE WHILE UNEMPLOYED
The recession is still affecting plenty of homeowners who are finding it extremely difficult to keep up with their mortgage payments. A likely solution is to refinance your mortgage and take advantage of the current low-interest rates so that your monthly payments become affordable. The question a few may ask is, will I be able to refinance my mortgage if I am unemployed? The simple answer is yes, but having said that, it is not easy. Lenders will always lookout for some type of insurance from borrowers to ensure that they will be able to make their monthly payments. Without a steady source of income or job, lenders will view them as risky borrowers, as your savings could soon empty and you may eventually default on the mortgage. If that happens, the lender will ultimately need to issue a foreclosure to the borrower, which is not an ideal circumstance as they can incur significant costs during the foreclosure stage, and the sale proceeds may not even cover the entire mortgage amount. If you ask most lenders today if they can refinance their house if they are unemployed, a few of them will say no. However, there are several ways in which you can get your mortgage refinanced even if you are unemployed. Below-mentioned is some options that one can explore:
Get in touch with a housing counsellor:
If you are unsure where to start, speaking with a professional housing counsellor is a great way to get all the information you need to refinance your loan. The Department of Housing will be able to assist by helping in preparing a budget for you, including making your credit score look decent for those borrowers whose credit score is not the best. Additionally, they will also explain the various refinancing options as well as the different types of mortgages for homebuyers. If you need more information or assistance, they will identify different alternatives to refinancing your home in the best possible manner.
Find an ideal co-signer:
Another way of significantly improving your chances of getting your mortgage refinanced when you are unemployed is to find a co-signer. A co-signer is an individual who promises the lender that they will make the mortgage payments even if they default. What this does is it gives lenders more assurance that there are higher chances of the loan being repaid. Additionally, adding a co-signer is of great help as you are adding another income to the loan, but at the same time, you are also adding their debts. You must apply for a loan with someone whose debt-to-income ratio is low.
If your credit score is low, having a co-signer on board is an added benefit, as it can determine the type of loan you can get. Most lenders take a look at the credit score of two or more borrowers when it comes to qualifying credit scores. But, if the co-signers credit score is significantly higher, the chances of qualifying for a loan are all the easier. Your co-signer must understand the responsibility that they will be undertaking before they agree to co-sign. If you fail to make the monthly repayments, they will be legally responsible for paying.
Make a sizable down payment towards the purchase of your home:
While lenders are more than happy to see income, they do not fully grasp that even though an individual is employed, there is no guarantee that they will make their monthly mortgage payments. If you have any savings or assets, you can make a sizable down payment to chalk off any lender concerns over your lack of replayability. You may even get your loan approved with a great credit score and history. Another theory is, that the larger the down payment, it leads to interest rates and smaller balances. This means manageable monthly payments.
Mortgage with no income verification:
For those individuals who are self-employed or seasonally employed, or those people who are experiencing an employment gap, it can be stressful applying for a refinance. When lenders are considering a mortgage application, they look at a few years’ worth of income statements when considering one’s mortgage application. A no verification mortgage is a type of non-qualifying mortgage. These loans charge very high-interest rates than qualifying loans, but at the same time can be easily approved if you are self-employed. Even though many lenders hesitate to refinance loans for unemployed borrowers, it is certainly not impossible.
A spouse with a steady stream of income:
If your significant other has a steady stream of income, the lender is more than likely to consider your refinance application, even though you do not have a job at the moment. If you are facing difficulty keeping up with your mortgage payments, there is a strong chance your spouse will be able to help you out.
A borrower’s creditworthiness is reflected in the credit report, and it will play an important role in their decision to offer you a mortgage refinance deal. Having significant assets other than your house may also convince lenders that they will be able to recover the loan amount in the event of the borrower defaulting. However, the borrower needs to have enough equity built in their home for that to happen. If you are not employed and your equity is less than 40%, most lenders will consider the refinancing loan way too risky. If the above-mentioned does not work, you can ask the lenders directly how to get your loan refinanced if you are unemployed. Various lenders have several criteria that can help you qualify for a loan. You should also be expected to pay a higher interest rate as your risk profile remains unfavourable.
If you have recently lost your job and are worried that your mortgage refinance may be denied, then please do not hesitate to reach out to the experts at Matrix Mortgage Global today to discuss your specific requirements. Our professional brokers will be more than happy to assist you.