Are There Any Refinancing Options for the Unemployed?
If you have recently become unemployed, one of your biggest concerns might be figuring out how to pay your mortgage.
Becoming unemployed is often unexpected and can make it difficult to sustain yourself financially while looking for a new job.
As such, you might not be able to make your regular mortgage payments. In this case, you might be drawn to the option of refinancing your mortgage to avoid foreclosure. However, you might not know whether or not refinancing is an option without a steady income.
Here is what you should know about refinancing your mortgage if you are unemployed.
What is Refinancing?
Refinancing is essentially the process of replacing your current loan with a new one.
When you apply for refinancing, the goal is to secure better loan terms such as better interest rates or a shorter repayment term.
If you are approved for refinancing, you simply use the new loan to pay off the old one.
However, this is generally done when people find themselves in an improved financial situation and believe they qualify for better terms.
What if your financial situation has worsened? Is this still an option?
Can You Refinance if You’re Unemployed?
Typically, mortgage refinancing requires that you have made all of your mortgage payments on time and that you have a steady income.
As such, the chances of being approved for refinancing while unemployed are incredibly small. For this reason, it might be better to pursue a loan modification.
While your chances of securing a new mortgage are slim while unemployed, it’s not necessarily impossible.
How to Refinance
If you want to apply for refinancing while unemployed, there are a few things you can do to improve your chances.
How to Improve Your Chances
First, you can try to find a cosigner. A cosigner with a stable income and good credit history can drastically increase your chances of approval. Keep in mind that your cosigner is responsible for your loan if you fail to pay it back, so you should avoid doing this if you don’t expect to be able to afford your loan payments.
Moreover, be sure to consult a HUD-approved housing counselor. Housing counselors help individuals facing foreclosure figure out their options. They’ll be able to help you determine how you can avoid foreclosure.
Lastly, be sure to call your lender to discuss your situation before refinancing. They may be able to work with you to create a new repayment plan. Lenders would prefer to get their money back later than not at all, so you may be able to negotiate a new payment plan.
Documents You Will Need
When applying for refinancing, you’ll need many of the same documents you used to apply for your mortgage in the first place, including:
- Bank statements
- Identifying information
- Most recent pay stubs
- Proof of insurance
You also may need to provide information regarding your current budget and unemployment documentation.
Being approved for refinancing when unemployed may be difficult; however, it is not impossible. There are a few ways you can increase your chances. Additionally, be sure to pursue other options like a loan-modification or housing counseling.