There are still many Americans without jobs right now as a result of businesses closing due to pandemic safety measures. What does this mean if you are currently unemployed and are hoping to purchase a home?
Can You Purchase a Home if You are Currently Unemployed?
If you lost your job just before you were planning to look for a home, in the middle of looking for a home, or just after a mortgage company has pre-approved you, you may have to hit the pause button on your plans. New mortgage qualifying requirements have become much tighter and unless there is another borrower on the application that can cover the mortgage with their income, the chances of final approval are very slim.
Unemployment payments from the government are income, but they are seen as temporary income and not a solid form of income. It can’t be used as a way of proving your ability to make mortgage payments.
How Long After Unemployment are You Able to Purchase a Home?
If you have recently found work that is great news! Just after being hired is not yet the time to start shopping for that home. Lenders will want to see a steady and solid history of income before offering pre-approval and then final approval. Your employment must be seen as established and stable for lenders to feel like it is a sound investment to loan you money.
How long do you need to be employed before a lender will consider approval? Generally, they like to see a minimum of six months of employment at your current job and about two years of history of continuous employment before. Any breaks in employment history past two years should not affect your ability to qualify for a loan.
Future Homeowners Should Carefully Watch Finances During Periods of Unemployment
Another thing to be aware of if you are unemployed right now and hope to purchase a home when you are back in the working world is to carefully watch your finances. It is not uncommon for unemployed people to become stretched thin and stressed out making ends meet during unemployment.
You don’t want to get into a situation where you cannot pay your bills or where you max out all of your current credit lines. This will negatively impact your credit score which, especially right now, is a huge determining factor of mortgage loan approval.
The best way to handle finances while unemployed so that it does not negatively hurt you in the future is to keep spending limited to bare necessities and not try to take out more credit so that you can focus all incoming money on paying bills on time.
If Your Credit Score Goes Down During Unemployment
If your credit score does take a hit during your unemployment period, it will slow you down, but it will not keep you from buying that home you are dreaming of. Six to twelve months of your score rebuilding could be all you need to be back in the running for mortgage approval. The fastest way to get your score up is to pay off past debts and get your debt to income ratio at a healthy level.
If you are hoping to buy a home in Zionsville or surrounding areas around Indianapolis please contact us anytime. We are here to help you find your next dream home.
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