A reader named Fred wrote in with this important question:
Can I get a mortgage if I do not have a job? There are so many factors to consider. Would you be kind enough as to give me some pointers as what to look for or avoid? Please help me. Thank you.
Fred, my short answer is not likely. The long answer is maybe, because getting a loan depends on many factors. Lenders look at your whole financial picture when deciding if you are a good risk, i.e., someone who is likely to pay them back.
Maybe you are a trust fund baby and has never worked a day but still has plenty of moolah to make good on a loan. If you are a regular working Joe, however, your chances are not as good because job stability is a factor lenders consider, so not having a job hurts you. Do you have any evidence of how soon you will get a job and how stable that job will be? How do you plan to pay your mortgage with no income?
Ultimately, the best way to answer your question is to prepare a loan application and submit it.
Start by figuring out what you can afford to buy using this calculator from the American Bankers Association, which recently shared tips to get a loan in this tight market.
Next, gather and organize your information, including pay stubs, tax returns, financial statements, and paperwork showing your monthly payments on your car, credit card, and student loans. Lenders will want recent statements going back three to 24 months.
To strength your application, include any additional information that proves additional income or wealth. Depending on your credit score and other factors, lenders will want to see that you have many months of PITI (principal, interest, taxes and insurance) on hand. Here’s a PITI calculator.
ABA also recommends you use a trusted institution, pay down other loans, read the fine print, and take into account the myriad costs of home ownership like insurance, maintenance, closing costs and taxes.
Good luck!
A lot of readers weighed in on my post about a friend who stopped paying her mortgage. A few readers castigated me for judging my friend so harshly.
Marla said:
I wouldn’t want to be a friend of yours. Yes, she did something foolish, but in this time and situation, times are tough and your loss of sympathy for your friend isn’t right.
Others, like OCNanis, gave me the benefit of the doubt:
I am sure she & her friend are perfectly aware of what would be shared on the blog & don’t think BB would post her insight in regards to the situation if she hadn’t verbalized it to her friend already. That is what friends do. Tell you what you need to hear even if it isn’t what you want to hear.
I re-read my post and believe it was fair if also brutally honest. I’ve never been the type to hold back, but I try to share my opinion in a way that doesn’t offend. I do not always succeed.
Luckily, my friend read the post and the comments and wrote me to clear the air. I’ve changed the name of her partner to protect her anonymity, but otherwise these are her words, verbatim:
1) I did not buy more house than I could afford – when both Shawn and I were working we made our payments on time every month. We did that for 3.5 years.2) We never saw our decision to buy a house as a way to turn a quick buck. Like most young people we bought whatever we could afford and figured that in 3-4 years time we’d have enough equity to move somewhere more to our liking.3) Our decision to stop making payments was not done blindly. We thought about this for a LONG time and didn’t do it until Shawn lost his job. We are not irresponsible people but staring at a negative equity of more than $150,000 can push many people over the edge. I’m glad the post forced people into the conversation. It’s interesting how people can make judgments – good or bad – on folks they don’t know.Anyway just my thoughts. Oh – we sought the counsel of two financial advisers before making this move.
We’ve all heard about people walking away from homes worth less than the mortgage, but until recently I did not know anyone in this situation. Then my girlfriend told me she and her partner were stopping mortgage payments. WHAT???
My friend paid $470,000 for her home in 2004. Now it it worth $300,000, according to Zillow. My girlfriend and her partner bought the home with two loans totaling 100 percent of the home’s purchase price. The intended to sell it before their main loan reset. When things got sticky no one would refinance because they lacked equity. The market crashed and, well, you know the rest.
In January they stopped paying their $3,100 mortgage. She feels guilty, but then her partner lost his job so she reasons they would not have been able to keep up with the payments anyway.
Her father, who stopped paying his mortgage in August, just received a letter from his bank saying they were willing to work with him. She hopes the same thing will happen to her.
“You can’t have a nation of people with s—y credit,” she said to me recently over coffee. “There’s got to be a forgiveness program.”
Maybe, I thought. But why in the heck did she buy the home, which she did not even really like, in the first place? She and her partner were making interest-only payments that added up to more than 30 percent of their monthly income. Come on, girlfriend!
“We believed in two years the market was going to be great,” she said. “We would sell the home, make a few thousand, and buy a home we really wanted.”
As an outsider, I can’t help but think she should have been smarter about buying the home in the first place. But then again, Hubby and I also bought a home just before the market peaked that stretched us financially. The main difference between my friend and me is that my mortgage was 30-year fixed and we sold the place before the bubble deflated.
I wished my friend had not made a decision that, in hindsight, was a bad one. If her bank will not modify her payment, she will have to file for bankruptcy.
On the other hand, if she negotiates a lower rate and can stay in her home, I will not feel like she has unfairly gotten ahead of folks like Hubby and I, who played our cards conservatively. My friend has a huge ordeal ahead of her (read: stress and paperwork) and if things work out well, she will still be living in a home she does not really like.
NPR says walking away from a home need not be a shameful decision. The station’s reporters found a web site called You Walk Away that “empowers homeowners who purchased their homes at the peak of the real estate market to take control of their financial future.” Which is not-so-subtle code for reneging on your mortgage.
The site has an interactive calculator that helps you figure out whether you should walk or not. Seeing how their business is helping people walk away, I’m guessing the calculator is biased. Still, it may be worth looking into for some readers.
If you are a homeowner struggling to pay your mortgage, check if you are eligible for lower payments under President Obama’s mortgage modification plan using a calculator from MainStreet.com.
To be eligible, all of the following must be true:
- Is the property owner-occupied?
- Is the unpaid mortgage balance less than $729,000?
- Did the mortgage originate on 1/1/09 or earlier?
- Are you having trouble paying the mortgage?
If you answered yes to the above four questions, continue using their calculator. If you qualify, the calculator also tells you what your new payment would likely be under Obama’s plan.
Getting a lender to modify your mortgage to make it more affordable is a complicated process. A recent story in the LA Times explains the ins and outs of the $75 billion federal program to help struggling homeowners.
If you have been fantasizing about negotiating lower mortgage payments, the story may well disappoint. “Loan modifications, with rare exceptions, can be obtained only by borrowers who can show there’s a substantial chance their troubled mortgages can get back on track.”
To be eligible for a mortgage modification:
- The home must NOT be an investment property
- The unpaid loan balance has to be $729,750 or less
- Loan must have been made before Jan. 1, 2009
- You must be employed or have a new job lined up
Read the full story here.
The Sunday NY Times Week in Review section published reader poems about the economic downturn. Here is a sampling. Contribute one by leaving a comment.
Those of us who’ve lost it all,
Thought not about the cost at all.
Those of us who are content,
Gave thought to every single cent.
- John Duvall, Hastings-on-Hudson, N.Y.
And:
The new recession
when rich folks must shop Costco
to save on Chanel.
- Maya Leland, Kaneohe, Hawaii
And:
I worked 50 years since I was 16
Saw visions ahead of the American dream
Saved and I saved, no splurges in sight
Bought an apt at the market’s height
Maxed my IRA and 401 too
Put it in blue chips, not CDOs like you
I dreamed of Paris and Venice and Rome
But I’ll be staying a lot closer to home
While all the bankers enjoyed their spree
Financed by naive ones like you and like me
- Barbara Roston, New York, N.Y.
And:
OK
401K
40.1K
4.01K
.401K
.0401K
NOT OK
-Gerald Duffy, Portsmouth, N.H.
And finally:
Last weekend
i wanted to buy something
spend a grand or two.
But then I remembered what the TV said
about the future
about tomorrow
about how I may not have a job.
So I sat by the window
and watched
the snow fall instead.
- Thomas Bernard Marblo, Charlotte, N.C.
If you lost your job and have a mortgage with Citigroup, you may be able to pay just $500 a month on your mortgage for three months, according to a CNN story. “Some homeowners may be able to get extensions after the 90 days expire, depending on their situation,” the story says.
To qualify for the Citgroup Homeowner Unemployment Assist program, you must be 60 days or more past due on your mortgages or in foreclosure. “The house must also be the customer’s primary residence,” according to an AP story.
Unemployed workers can also pay significantly less for health insurance because of the stimulus package. Previously, COBRA allowed workers to continue coverage for 18 months if they paid the entire premium plus a 2% administrative fee. Now, the stimulus package will cover 65% of the COBRA payment for workers laid off between Sept. 1 and the end of 2009.
“If you delayed signing up for COBRA coverage when you lost your job, you have 60 days to re-enroll after you receive a notice from your employer,” says a USA Today story. Keep reading for more details.
Name: RickLocation: Calabasas Hills
