Although many borrowers see mortgage refinancing as an attractive opportunity to trim their monthly payments, qualifying can be difficult if you’re unemployed. But you have options, and there are ways to improve your chances. If you can show an alternate way to secure a new loan, you may be able to find a lender that will work with you or a program designed to work with someone in your situation.
What you should consider
Before you start to look for a lender, keep in mind the following considerations:
Your unemployment income doesn’t count. Most lenders don’t consider unemployment payments as income for a loan, which means you’ll need to prove you have another source of income to secure your refinance.
Length of unemployment matters. If you’re on sabbatical or on temporary leave, providing your lender with proof of when you’ll return to steady employment can improve your chances of getting a new loan.
Refinancing may not be the solution. If you’re unemployed, consider your lifestyle and financial needs. Know whether refinancing is the best solution for your financial situation. If you were hoping for low-cost credit from a cash-out refinance, consider alternatives.
Refinancing isn’t free. Refinancing means taking out a new loan to pay off your current mortgage, which comes with closing costs. So make sure to weigh those expenses against the amount you’d save every month on your mortgage payments.
Refinance options when you’re unemployed
Here are some mortgage refinancing options to look for as you shop around for a lender to work with you if you’re currently unemployed.
Guarantor-secured refinance. If you know someone who will sign onto the refinance loan as a guarantor, that may be enough security for a bank to take a chance on you. But if you default, your guarantor is on the hook to pay your debt for you.
Low-income loan programs. Some lenders offer refinance loans with special rates for low-income borrowers. Often these programs require you to pass an online financial literacy class, and some require that your home is located in a specific area.
FHA streamline refinance. This option is only for borrowers who are current on their existing FHA mortgages. It doesn’t allow you to cash out on your equity, but the loan requires very little documentation and doesn’t require income verification.
VA streamline refinance. This loan is more often called an interest rate reduction refinance loan (IRRRL). Like the FHA streamline, you need to be current on your existing VA mortgage, but it requires less documentation and has lower closing costs.
USDA guaranteed loans. If you live on a family farm or ranch, the USDA’s Farm Service Agency (FSA) works with certain lenders and will guarantee up to 95% of your loan, which can help you secure a refinance.
Compare mortgage refinance lenders and brokers
Compare these lenders and lender marketplaces by the type of home loan you’re searching for, state availability and minimum credit score (for a conventional loan). Select See rates to provide the company with basic property and financial details for personalized rates.
Disclaimer: The partners on Finder's mortgage comparison tables are sorted in alphabetical order.
Use the following like a checklist of what you can do to give yourself the best chance of getting your refinance application approved.
Be current on your mortgage. Most lenders will want to see that you’ve paid your existing mortgage on time for at least the last six months, if not longer.
Check your credit report. Go through your credit report methodically to make sure there aren’t any errors or old entries that might hurt your chances.
Meet with a housing counselor. The US Department of Housing and Urban Development provides a list of approved counselors who offer low-cost or free consultations and may help find programs to assist with your refinance.
Find a mortgage broker you trust. A quality mortgage broker will know the lenders in your area and may be able to direct you to which lenders are willing to work with borrowers in your circumstances.
Gather your paperwork. Make sure you have evidence of savings, all your income streams, monetary gifts you’ve received or any other asset that might help prove your ability to make your payments until you find new employment.
Show your job search. Be prepared to prove that you’re actively seeking employment. If you’re taking classes through your state’s employment office or elsewhere to improve your marketability, be sure to provide proof of that as well.
Alternative options
If you’ve run the numbers and don’t think refinancing is for you, consider the following alternate options:
Loan modification. With this option, your lender can sometimes adjust your interest rate or extend the term of your loan to lower your payments.
Forbearance. You can sometimes request a mortgage forbearance to pause your mortgage payments when you can’t pay due to hardship. But repayment options vary, so know what will be expected of you when the forbearance is over.
Final thoughts
Before signing on the dotted line, carefully consider the cost and risks of refinancing your mortgage while unemployed. Weighing those against the alternatives and speaking with a mortgage broker, housing counselor or financial planner can also help to ensure you’re making the best possible financial decision.
Heather Petty was a personal finance writer at Finder, specializing in home and personal loans. After falling victim to a disreputable mortgage broker when buying her first home, she’s on a mission to help readers avoid similar experiences when managing their own finances. A self-proclaimed word nerd, her writing and analysis has been featured on MSN, Credit.com and MediaFeed, among other top media. Heather previously worked as a technical writer and editor for the casino systems industry and is an internationally published young adult mystery author. She earned a BA in English with a minor in journalism from the University of Nevada, Reno. See full bio
Heather's expertise
Heather has written 94 Finder guides across topics including:
Learn more about monthly payments and interest on a $500,000 mortgage over 15 or 30 years. Plus, find out how much you need to make to afford repayments.
How likely would you be to recommend Finder to a friend or colleague?
0
1
2
3
4
5
6
7
8
9
10
Very UnlikelyExtremely Likely
Required
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
Advertiser disclosure
Finder.com is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions. While we are independent, the offers that appear on this site are from companies from which Finder receives compensation. We may receive compensation from our partners for placement of their products or services. We may also receive compensation if you click on certain links posted on our site. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us. Finder compares a wide range of products, providers and services but we don't provide information on all available products, providers or services. Please appreciate that there may be other options available to you than the products, providers or services covered by our service.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
