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

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If you are a seasonal worker thinking of buying a home, you may be wondering: “Can I use unemployment income to qualify for a home?” The answer is yes — as long as you’ve been getting the benefits for at least two years and will continue working at your seasonal job.

Understanding how to use unemployment income to qualify for a loan may help you determine if you can buy or refinance a home.

Do unemployment benefits count as income for a home loan?

Lending guidelines only allow you to use unemployment benefits to qualify for a loan if you can provide proof the income has been received for at least two years. Employers may also need to confirm seasonal employees are likely to be rehired in the future.

For example, landscape or construction workers often work on projects until they’re completed. Or ski resort employees typically only work during the winter. As long as workers in these types of temporary positions have a two-year history of unemployment income in between jobs or seasons, it can be used to qualify for a new mortgage.

Unfortunately, if you were recently laid off and just began receiving unemployment benefits, the lender can’t accept them as income for a mortgage preapproval.

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 programUnemployment 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

You’ll need to collect extra paperwork to use unemployment income when you apply for a home loan. Gather up the following documents ahead of time:

Two years’ worth of tax returns. Unemployment income can only be used if it appears on your federal tax returns.

Employer verification of your job history. Lenders typically contact your employer verbally to confirm you’ve worked at least two years in a seasonal job. A written verification of employment may also be required.

Confirmation you’re likely to be hired again next season. Your employer may need to give the lender a thumbs up on future work to ensure you’ll continue to earn the income to repay your mortgage.

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), if you currently have an FHA or VA mortgage.
  • No income verification mortgages. Mortgage lenders may offer non-qualified mortgage (non-QM) programs that allow you to qualify for a mortgage with documents or assets besides your tax returns or pay stubs.
    • Asset-based depletion. Typically for borrowers with a high net worth, the lender divides the total cash balance of a cash asset by the loan term and uses the result as income to qualify.
    • Bank statement loans. With these programs, lenders look at deposits on your bank statements for a one- to two-year period to calculate income for the loan instead of using tax returns, pay stubs or W-2 forms.
    • Debt service coverage ratio loans. Real estate investors can qualify for mortgages purely based on the rental income on the home they’re buying, as long as they can afford the higher down payment and interest rates.

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