Can you get a mortgage without a permanent job?

People today are earning income from a wider range of sources than perhaps ever before. You may be a freelancer, a gig worker, a solopreneur, a small business owner, an artist, an influencer, a part-time worker; the list goes on and on. Plenty of hard working people fall outside the bounds of traditional full-time, W-2 employment. But can you get a mortgage without a permanent job?  

The answer depends on the specifics of your financial situation and the lender you choose to work with. However, broadly speaking, yes, borrowers who meet their lender’s financial criteria can potentially get a mortgage without having a full-time job.  

In this article, we’ll provide more context for what lenders look for regarding employment and income, how to prove financial stability, and how to improve your appeal as a borrower.

How Lenders View Employment and Income

Lenders use your employment situation and income information to estimate how likely you are to be able to pay back your loan. Among other things, they are looking for stability in those circumstances.  

Often you will hear about the importance of having at least two year’s of work history when applying for a mortgage. This number is generally accepted as a signal that the borrower is in a stable, financially reliable position. Though, it can cause some anxiety in applicants with non-traditional forms of employment or gaps in their employment history.  

The two year threshold was determined by Fannie Mae and Freddie Mac for those seeking conventional loans. However, there are exceptions and nuances to this rule that can be discussed with your lender.  

For example, you may not have two consecutive years working with the same employer, but you do have two years working within the same industry and in a similar line of work.  

Still, employment history and income are important factors in loan approvals, but they are not the end all be all. Lenders will evaluate your risk as a borrower based on factors including your credit history and assets.  

That’s why a borrower could potentially qualify for a loan even if they were completely unemployed or retired—though these applicants would probably need a very robust financial profile.

Proving Income Without Full-Time Employment

The process of proving your income to a mortgage lender is somewhat similar between full-time work and other types of work or income, though a bit more complicated. Full-time workers can turn in their pay stubs and W-2s for a fairly streamlined experience; others may not have that luxury.  

Freelancers, gig workers, and other self-employed people usually need to track down two years of income verification documents. These may include your 1099s, bank statements, profit-loss statements, or tax returns. Lenders typically look for consistency in these documents, meaning that your income did not fluctuate widely between those two years.  

Other forms of income documentation could include investment income or payments from social security, pension, disability, child support, or alimony. Borrowers can also leverage their savings and other assets to show they can afford the mortgage.

How to Improve Your Chances at Getting a Mortgage

As someone without the straightforward benefits of a full-time job, there are other ways you can make yourself a more appealing applicant for a mortgage. Consider some of the following to strengthen your application.

Pay Down Your Debt

Mortgage lenders will look at your debt-to-income (DTI) ratio when considering your mortgage application. DTI is calculated by adding up all of your recurring monthly debt payments and dividing that number by your gross monthly income. Then, multiply that number by 100.  

Lenders typically want to see a DTI of no more than 36%, but that may vary depending on your lender and other factors pertaining to your application. This is one measure that tells the lender if you will be able to comfortably pay your mortgage payments. 

If your income is not likely to significantly grow soon, focus on paying down debts to improve this ratio.

Save a large down payment

One way to improve your chances of qualifying for a mortgage without a traditional full-time job or with gaps in your employment history is to save a large down payment. If possible, you may want to start preparing to put down something around a 20% down payment. When you have enough money to be able to borrow less, lenders may assess you as less of a risk.

Improve Your Credit Score

Your credit score shows lenders how well you’ve been able to manage debt up to this point. If your score is below 640, and you’re applying for a conventional mortgage, you would likely benefit from raising that. Be sure to make on-time payments on your credit cards and other recurring debts.  

Include a Co-signer or Co-borrower

Co-signers and co-borrowers (or co-applicants) can strengthen a mortgage application. There are a few key differences to note between the two, though.  

A co-signer is someone who agrees to take responsibility for repaying the mortgage if the borrower defaults. However, they have no ownership stake in the property. Their credit and income are simply used to help qualify the primary borrower for the loan. Usually, a co-signer is a trusted family member. 

A co-borrower, on the other hand, shares equal responsibility for repaying the loan, as both names appear on the loan documents, and both incomes, assets and credit histories are looked at by the lender. A co-borrower is typically a spouse, domestic partner, or sometimes a parent. They will have an ownership stake in the home.  

Consider Government-Backed Loans

Government-backed loans often have more lenient requirements for a borrower’s employment history, down payment amount, and credit than conventional loans. Federal Housing Administration (FHA), Veterans Affairs (VA), and United States Department of Agriculture (USDA) loans can be good options. These loan types are guaranteed by the government, meaning the government insures the loan, so lenders can take on less risk.

Final Thoughts

You don’t necessarily need full-time employment to qualify for a mortgage loan, though it is often helpful. Applicants can be self-employed, part-time workers, seasonal workers, freelancers, or any number of other occupations and still qualify for a mortgage.  

However, it must be noted that you may need to bolster other aspects of your borrower profile to get your application over the finish line. If you are trying to get a mortgage without a permanent job, work with your trusted lender to determine how best to improve your application. Good luck in your home search!