Qualify for a Home Loan While Being Laid Off and Drawing Unemployment

Is it possible to qualify for a home loan while being laid off from a job and drawing unemployment benefits? Also drawing SSI from a dependent child?

3 Answers

While qualification guidelines can vary widely depending upon an individual lender's guidelines, your credit and asset base, and the sort of loan you are seeking . . . there are some good general guidelines for qualifying income:

Most underwriters/lenders/banks want to see that the income that you are using tro qualify will reasonably continue (or should be expected to continue) for 3 years or more. If you have SSI income for a dependent child that is 5 years old, and the income is reasonably expected to continue until the child reached 18 or longer, this income can be included in your calculations (and may even be adjusted up due to tax free status). If the child is 17, the underwriter will likely not include it unless there is documented proof (college doesnt always count) that the income will continue into the child's legal adulthood (for instance, the child is disabled and will remain dependent on you in a legal sense).

Unemployment can sometimes be counted as income if it is customary and has a documentable history in your line of work - for instance, some tradesmen and women work an 8 month season when the weather allows and get "laid off" during every off-season to collect unemployment until they can be rehired. If you have a 2 year plus history of this pattern, the underwriter may allow you to qualify with the unemployment income and a letter from your employer indicating that you are eligible for re-hire in season.

On the flip side, if the layoff is due to the economy or job conditions and there is no promise of re-hire, you will generally not be allowed to qualify, as unemployment benefits are time limited in most cases and cannot be expected to continue for 3 years or more.

My advice would be to speak with several knowledgeable loan officers in your local area regarding your income situation and get their expert opinions of available loan products. Gather all related paperwork upfront, and make a good case for your expected income over the next few years. A good, experienced loan officer will be able to count every possible allowable dollar you make on your behalf. 

Unemployment benefits are short term and thus wouldn't be allowed as a source of calculable income, unless...you somehow could prove that those unemployment benefits would last for at least 3 years from the time you close your loan. In that case, depending on the lender, you should be able to use that income without issue. You would need to provide the Lender with documents showing those benefits continuing through a certain time period. 

Social Security benefits are able to be used but again you would need to show at least 3 yr continuance of the benefits. If your child is 16 and and the benefits stop when they turn 18, for example, those benefits would not be counted as calculable income.

Unemployment income is problematic at best.  The reason is that the lender needs proof that any source of income will continue for a minimum of three years.  Obviously, your unemployment benefits may run out before then.  I know that the current Congress has extended unemployment benefits, but your own circumstances may also determine the length of time your benefits will continue.  You will have to have some sort of documentation from whatever agency is paying you benefits to document the length of time the benefits will continue.    

As for the child's SSI benefits, it can be used but the same three year rule applies.  That means that the age of the child comes into play.  Typically, an underwriter is going to require that you provide a birth certificate for the child to show that he/she is less than 15 years old and that you have at least 3 years before the child turns 18 and the benefits will stop coming to you.

You will have to still qualify for other underwriting guidelines such debt to income ratio, credit score, asset requirements, and maximum loan to value ratio.