Here's What Happens When You Apply for a Mortgage Without a Job

There are different factors that mortgage lenders look at when deciding whether to approve or deny home loan applications. One factor is your credit score, because it speaks to how risky (or not) a borrower you are.

Experian says that a credit score under 580 is considered poor. A score that low sends the message that you're not necessarily the most trustworthy borrower, and that doesn't bode well. As such, it generally takes a minimum credit score of 620 to qualify for a conventional mortgage, though there are certain types of loans, like FHA loans, that allow you to borrow for a home with a lower score.

Another big factor that goes into mortgage approval is your income. Your lender is most likely loaning you a large sum of money to finance a home purchase, so it wants reassurance that you'll be financially capable of paying it back.

If you don't have a job when you apply for a mortgage, you may have a hard time getting approved. But that's not always the case.

It's a matter of income, not employment

It's a big myth that you absolutely need a job in order to qualify for a mortgage. Rather, what you need is income.

Specifically, you need to be able to prove to a mortgage lender that you have a steady income, and that your income is high enough to cover the monthly home loan payments you'll be on the hook for if your application is approved. But you don't necessarily need to be holding down a job.

Let's say you're retired and are collecting $2,000 a month from Social Security and another $2,000 a month from a pension your former employer set you up with. That's an annual income of $48,000, which may be high enough to support the mortgage you're looking to take out. Since both of those are reliable sources of income, a lender may have no problem giving you a mortgage.

Similarly, if you can prove that you have a steady stream of investment income, that alone may be enough to qualify for a mortgage. Let's say you own a rental property that has been consistently generating $3,000 a month in income. That might be enough to satisfy your lender's requirement.

You probably need a job if you don't have other income

If you're temporarily unemployed and you don't have other income coming your way, then there's a good chance you'll struggle to get approved for a mortgage until you're gainfully employed again. But all told, having a job is not a prerequisite for getting a mortgage. So don't assume you can't borrow for a home just because you aren't working.

Also, if you're applying for a mortgage jointly with someone else, you might get approved if you don't have a job or income yourself, but your joint applicant has enough income to qualify. At the end of the day, lenders want to be repaid when they loan out money. Prove you're capable of doing that one way or another, and you're likely to get approved.