Can you secure a mortgage with no job?

weaseFebruary 26, 2009

I stand to have a lot of cash when I sell my home next year. I'm planning to move to another state with no job in mind. I will be investing in rental properties after a while.

I'd like to secure a maximum conforming loan (ie $417,000) on a home that I will buy in the $800's. In other words I'll be putting about 50% down. I have outstanding credit ratings. Will banks make this loan to me? Will they try to jack up the interest rate?

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live_wire_oak

Of course you can buy a home with no job. Retired folks do it all the time. BUT, you will need well documented income and a stable history of that income in order to qualify for a loan. Otherwise, pay cash.

    Bookmark   February 26, 2009 at 10:28AM
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pamghatten

live wire is correct, and well documented usually means a 2 year history of receiving that income.

    Bookmark   February 26, 2009 at 12:49PM
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wease

To clarify, no job equals no income for my situation. Are you thinking that I would be living off of investment/interest income? I will not be. I'll just have a lot of cash that I can sink into a down payment.

    Bookmark   February 26, 2009 at 1:53PM
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dave_donhoff

Hi Wease,
If you have zero income, there are basically two ways to get financing;

A) Conforming underwriting will ASSIGN you income at a curmudgeonly "safe interest rate" of usually 2% on your liquid investment assets... so if you have $1MM in liquid investment assets you'll be qualified as though you have $20,000 annual income. Multiply according to your actual holdings.

B) You can get equity-based private loans that ignore your income entirely. These are risk-based, and obviously with no income considered there is no income to pay the bills... thus very high risks. Rates are in the low double digits, and fees are 4-10 points.

Cheers,
Dave Donhoff
Leverage Planner

    Bookmark   February 26, 2009 at 2:04PM
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gibby2015

I just read an article about how many cash buyers there are right now - people in your situation. Not sure if that's because they want to pay cash or can't get financing.

    Bookmark   February 26, 2009 at 8:29PM
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polie

There needs to be income to support a mortgage even if there is a large down payment.

    Bookmark   February 27, 2009 at 9:30PM
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wease

My job over the last 2 years or so was flipping a home. When I sell it, that will be my income. It is my primary residence as well. Any chance they can look at that as income? I plan to do similar work in my new location.

    Bookmark   February 28, 2009 at 6:27AM
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live_wire_oak

I don't see how you can claim that as income. Especially since the home hasn't sold, and in this market, may not sell anytime soon, or at a price that will allow much profit to you. What are you using to live on? Do you not have a "regular" job? "Flipping homes" is pretty much a thing of the past hot market times, unless you have enough money to both live on and to buy outright a handyman special and the materials to renovate it. Banks are very leary of ending up owning that handyman's special, and it will be difficult to impossible to get even a "regular" mortgage on one without a considerable investment income returns (not from a single flip either) from the buyer to live on. In other words, it's gonna be hard to get a loan unless you really don't need a loan. If you can pay cash and really don't need a loan, then perhaps you can qualify for a high rate high risk loan. If you have the cash to continue your current path, then use it. If you are depending on a bank's loan to finance your speculation, then I'd suggest a different career path and save that for a part time occupation. Unless you're Donald Trump level, real estate speculator isn't a full time job.

    Bookmark   February 28, 2009 at 11:15AM
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tampacondo

Why not just purchase a $400,000 home and have no mortgage?

    Bookmark   February 28, 2009 at 11:25AM
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pamghatten

No wease, a lender will not consider the sale of your primary residence as income. To a mortgage underwriter, you spent 2 years fixing up your home and are now selling it. Those proceeds are assets, not income. Pay cash.

    Bookmark   March 2, 2009 at 12:21PM
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