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Mortgage approval papers with keys and a mini house on top.

Jan 16

Can You Get Approved for A Mortgage Without A Job?

Author: Chris Allard

Category: Helpful Tips

 

Securing a mortgage is a pivotal step in realizing the dream of homeownership. However, the question often arises: Can you get approved for a mortgage without a job in Canada? Life is unpredictable, and circumstances vary, making this a valid concern for many prospective homebuyers. In this blog, we’ll explore various scenarios and potential solutions, shedding light on the possibility of obtaining a mortgage without a traditional job.

Do You Need A Job To Get A Mortgage?

The straightforward answer: No, you don’t necessarily need a traditional job to secure a mortgage. In a dynamic and ever-changing economy, financial situations vary, and lenders acknowledge this reality. The key is providing enough evidence of your ability to meet mortgage obligations, even without the conventional stability of a regular job.

The age-old notion that a full-time, reliable job is an absolute prerequisite for securing a mortgage is ripe for reconsideration. While traditional employment aligns with the conventional homeownership route, making the approval process easier, it’s not the sole determining factor. 

While getting a loan or mortgage without proof of income or a job can be more complicated, the good news is that it’s not impossible! Below, we’ll explore various avenues and workarounds to help you secure the right mortgage for the home of your dreams.

Other Reliable Income

One avenue to explore is demonstrating reliable alternative income sources. In Canada, lenders may consider income from various sources such as rental properties, investments, or even child and spousal support. Evidence of consistent, verifiable income can strengthen your mortgage application, showcasing your ability to meet financial obligations.

Significant Cash Reserves

cash reserves

Another critical factor lenders consider is your financial stability, and having substantial cash reserves can significantly bolster your mortgage application. These reserves act as a robust safety net, assuring lenders that you possess the financial means to cover mortgage payments consistently, even without a traditional job. 

This reflects positively on your financial responsibility and underscores the importance of effective money management and the discipline of consistent savings. Lenders often view individuals with ample cash reserves as lower-risk borrowers, increasing the likelihood of mortgage approval and favourable terms. Building and maintaining a healthy financial cushion showcases your commitment to meeting financial obligations, reinforcing your candidacy for mortgage approval.

Net Worth Programs

Net Worth Programs are for those who have at least once source of income, strong liquid assets and credit but don’t qualify for a mortgage on their income alone. To be eligible for these programs, the borrower must have a minimum of 20% of the purchase price as a down payment. The amount of additional funds required to qualify for Net Worth Programs is lender-specific. However, most lenders have minimum savings requirements between $150,000 and $250,000. 

Borrowers need to demonstrate $1 in savings for every additional $1 they need in financing. This is a requirement on top of funds for a down payment. For example, if a client qualifies for $200,000 in financing but needs a loan of $400,000 for a $500,000 purchase, they would need $300,000 in total: $100,000 for the down payment and an additional $200,000 for the net worth component. 

Lenders have different policies regarding what they can and cannot use for assets, but in general, they wish to see savings, GICS, TFSAs, mutual funds, RSPs, publicly held US/CAD stocks, Canadian/Provincial bonds, and more.

Secure a Job-Offer Letter

While not everyone currently has a job, some individuals might have a job offer in hand. In such cases, a job offer letter becomes a powerful asset when navigating the mortgage application process. This document:

  • Serves as tangible evidence of your imminent employment and the associated income prospects. 
  • Conveys a sense of stability and commitment to lenders, assuring them of your ability to meet financial commitments once your employment begins. 
  • Paints a forward-looking financial picture, showcasing your proactive approach and determination to secure a reliable income stream. 

This additional layer of documentation can help your mortgage application, positioning you as a favourable candidate despite the current lack of employment.

Co-Sign

Enlisting a co-signer can be a game-changer in pursuing mortgage approval. A co-signer is essentially a financial ally who commits to assuming responsibility for the loan if, for any reason, you find yourself unable to make payments. Typically, a co-signer possesses:

  • Stable income
  • Strong credit history

This strategic move not only provides lenders with an additional layer of assurance but also demonstrates your commitment to responsible financial management.

Approaching a co-signing arrangement requires transparency and clear communication. It’s imperative to have open and honest discussions with them about the financial responsibilities involved and the potential impact on both parties’ credit scores. 

Work With A Mortgage Broker

mortgage broker shaking hands with client.

When it comes to securing a mortgage without a traditional job, enlisting the help of a mortgage broker is a strategic move that can provide tailored insights for your unique circumstances. These professionals are expert navigators in the complex landscape of the Canadian real estate market, offering invaluable assistance in unconventional scenarios. Mortgage brokers can:

  • Assess your individual situation and help you find lenders with tailored options. 
  • Understand that each homebuyer’s journey is distinct.
  • Provide personalized advice on alternative routes to mortgage approval. 

Whether you’re exploring non-traditional income sources, considering co-signers, or evaluating unique financial situations, these experts can offer a roadmap for success.

Additionally, mortgage brokers often have established networks within the real estate and financial sectors, providing you with access to a range of resources and potential solutions. By leveraging their expertise, you can navigate the mortgage approval process with confidence

Mortgage Options 

There are different mortgage solutions available that can assist you in your journey toward homeownership, even without a job. It’s important to note that alternative mortgages are not best-rate mortgages—they usually come with lender fees because you can usually only get them through specialized or private lenders. These fees generally range from 1% to 4%.

Alternative Income Verification Mortgage

In some instances, lenders offer a ‘no income verification mortgage.’ This option is designed for individuals with non-traditional income sources or irregular pay structures, acknowledging the evolving landscape of employment. While interest rates might be higher, it can be a viable solution for those with fluctuating incomes, offering a pathway to homeownership without the stringent income documentation requirements typical of traditional mortgages.

The stated income program, for example, allows a self-employed person to provide 12 months of bank statements showing that they have income to be used regardless of their income tax reported. Other alternative income that may be accepted include pensions, disability income, and spousal and child support payments.

Equity Mortgages

If you find yourself in a situation where a traditional job is not part of your financial profile, but you own a property with a substantial amount of equity, exploring equity mortgages can open doors to securing the financing you need. Equity mortgages allow you to leverage the value you’ve built in your existing property to obtain a new mortgage. 

Lenders often view borrowers with significant equity favourably, as it serves as substantial collateral, mitigating the perceived risk. This increased security can lead to greater flexibility in mortgage terms, potentially offering more favourable interest rates and accommodating repayment schedules. 

For example, if you have more than 35% equity in your home, best-rate lenders like banks and credit unions might be more willing to stretch their standard qualification guidelines. This is the same for near-prime lenders. If a borrower has at least 35% equity, then the lenders can consider doing the file as a non-conforming loan, which means it does not meet federal guidelines, but they can still agree to do the file.

Your Dream Home is Within Reach

While securing a mortgage without a job in Canada may pose challenges, it’s not an impossible feat. Exploring alternative income sources, showcasing financial stability, securing a job offer letter, considering a co-signer, consulting mortgage brokers, and exploring specialized mortgage options are viable pathways.

Remember, the key is to present a compelling case to lenders, emphasizing your ability to meet financial obligations. If you have questions or need personalized advice tailored to your situation, the Chris Allard Mortgage Team is here to help.

Contact us today to discuss your unique circumstances, and let us guide you on the path to homeownership. Your dream home might be closer than you think!

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