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How Seasonal Workers Can Use Unemployment Income to Qualify for a Mortgage

If you were recently laid off but want to refinance or buy a home, you may be asking: “Can I use unemployment income to qualify for a mortgage?” The answer is no — unless you’re a seasonal worker who regularly receives unemployment compensation during your off-season.

Most standard mortgage programs will count unemployment income as long as you’ve been getting the benefits for at least two years.

Do unemployment benefits count as income for a home loan?

Lending guidelines don’t allow you to use unemployment income to qualify for a mortgage if you’ve just begun receiving it. That’s bad news for many workers who were furloughed or unemployed because of COVID-19-related business closures.

However, there are exceptions for seasonal workers who can provide paperwork showing they’ve received unemployment income for at least two years. Employers may also be asked to confirm that seasonal employees are likely to be rehired in the future.

For example, construction or landscape workers often work on a project until it’s complete. Or someone who works for a ski resort might work only during the winter. As long as workers have a two-year history of unemployment income in between jobs or seasons, it can be used to qualify for a new mortgage.

4 mortgage programs that allow unemployment income to qualify

Most conventional and government-backed home loan programs allow you to use unemployment income in certain situations. You still have to meet the minimum mortgage requirements for your credit score, down payment and debt-to-income ratio (DTI) for each loan type.

Take a quick look at the guidelines for acceptable unemployment income based on the different home loan types below:

Mortgage Program Unemployment Income Requirements
Conventional loan Proof of receipt for 2 years
Verification of future employment
FHA loan
(Insured by the Federal Housing Administration)
Proof of receipt for 2 years
Verification of future employment for at least 3 years
VA loan
(Guaranteed by the U.S. Department of Veterans Affairs)
Proof the income is a regular part of income due to the nature of work
USDA loan
(Backed by the U.S. Department of Agriculture)
Proof the income has been received for 1 year

How to document unemployment income for a mortgage

There are some extra hoops to jump through if you want to use unemployment income when applying for a home loan. Have the following documentation handy for your lender:

  • Two years’ worth of tax returns. Unless unemployment income appears on your federal tax returns, it can’t be used for a mortgage.
  • Employer verification of your job history. Your employer may be contacted to verbally confirm that you’ve worked at least two years in a seasonal job. Some lenders may request a written verification of employment.
  • Confirmation you’re likely to be hired again next season. Lenders may contact your employer to give a thumbs up on future work to ensure the income will continue.

How to get a mortgage without income verification

Some home loan programs don’t require proof of income or employment. And in some cases, lenders may allow you to prove you can repay the loan by converting assets to income.

  • Streamline mortgages. You may be able to refinance without any income documentation with an FHA streamline or a VA interest rate reduction refinance loan (IRRRL).
  • No income verification mortgages. Alternative mortgage lenders may offer programs that turn your cash assets into qualifying income for a mortgage.
    • Asset-based depletion. Typically for borrowers with a high net worth, the lender divides your total cash balance by the loan term and uses the result as income to qualify.
    • Bank statement loans. Instead of tax returns and pay stubs, lenders look at deposits on your bank statements for a one- to two-year period to calculate income for the loan.
 

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