Buying a home while unemployed

[use2betrix]

Does anyone have any experience with buying a home while unemployed? My wife and I will be looking for a home in the next few years, and would likely do it while not working. I do contract work and take months off between jobs, so that’s really the best time for us to look and buy. Our only debt is a 5th wheel we live full time in typically. Credit is perfect. The house would likely be between 1-2x my average yearly salary. Our liquid investments would be around the cost of the home as well.

Thoughts?

[I'm a red panda]

I purchased a home while both my husband and I were unemployed, we had both left jobs to relocate. We gave the bank our past salaries (I had 1 year of work experience outside of part time jobs in college, husband had 2) and our expected salaries. Our mortgage was about 2x our annual income and we had no problem. We were young and only had modest savings. We did put 20% down.

This was before the crash though. Might not work that way now.

[LiveLean]

If you're paying cash and the question is should you empty your reserves to buy it, that would depend on how comfortable you feel with your sporadic income.

If you're looking to obtain a mortgage, unfortunately brokers don't care that you have liquid assets to pay for it. They want to see W-2 income, which is ridiculous since someone who relies on W-2 income could lose 100 percent of it with a layoff, downsizing, firing, etc. You can point to consistent 1099 income for many years, presumably, and will never lose 100 percent of income since you have multiple clients. This obvious logic doesn't work, however. They want to see W-2 income.

[swampwiz]

Typically, if a canonical full-time job is not there, the borrower needs to prove income by showing 3 years of tax returns.  With everyone Ubering, I wonder how banks are going to deal with that.

Interestingly, I am looking at getting a loan based on the value of my IRA.

[trollwithamustache]

I believe for purposes of this exercise, you are not unemployed, you are just self employed. They will want to look at more years of your income to make their credit determination.

[Holyoak]

If you're looking to obtain a mortgage, unfortunately brokers don't care that you have liquid assets to pay for it. They want to see W-2 income, which is ridiculous since someone who relies on W-2 income could lose 100 percent of it with a layoff, downsizing, firing, etc. You can point to consistent 1099 income for many years, presumably, and will never lose 100 percent of income since you have multiple clients. This obvious logic doesn't work, however. They want to see W-2 income.

This was true for me when I asked USAA for a mortgage when I ER (they see unemployed) back in 2014; Been a customer since 1988, two previous mortgages with them, car insurance, brokerage account, bank accounts, etc.  They said no, even with many multiples of the loan value IN CASH with them.

Walked in off of the street into a PNC bank, got their mortgage persons contact info, and online got mortgage.  Simply showed them net assets, tax returns, etc.  I guess it can be done post housing bubble crash, but I agree it can be very difficult.  I wish you sincere good luck.

[use2betrix]

Thanks for all the good posts so far.

Let me clarify a bit more:

While I say “contract work,” what I really mean is - temporary positions. They are nearly always W-2. In the past 8 years the projects have ranged from 3 months to 1.5 years. Last year I only worked 4.5 months and made about 70k. The average for the previous three years was 180k (didn’t take much time off.) House-wise we would be looking at something in the 200k-400k range depending on a lot of factors.

[TheWifeHalf]

My son worked temp jobs for 2 years, the house he wanted (on a golf course) went up for sale the day he got a permanent job. The house was 169,000, he put 70,000 down. The gal at the bank told him to thank his parents for the way they raised him!
This was 6 years ago, he was 27, and as far as I know, is fiscally responsible.

The bank is in a very small country town, that I've been a member of since I was 10 or so. In fact, I told my son that when he was born, we went into the bank and all the gals oo'd and ah'd over him.

[FiftyIsTheNewTwenty]

Like others have said it's harder these days without W-2 employment.  But keep trying!  A community bank or a seasoned broker with a lot of product knowledge may be able to find something for you.  Those seasoned brokers may be at a bank or independent, so try them all!

[partgypsy]

It is more difficult (how much, I can't say), to get a mortgage if you don't have the most recent paystub. Even for our home equity loan, we had to give them a whole bunch of information on w-2, pay stubs, and this was for a home equity loan of 10% of existing equity of the house.

It may be possible if you get someone to manually underwrite the mortgage, by looking at past years employment.
Again, they don't really care that you have the house amount in an account; their thinking is there is nothing from stopping you spending all that money tomorrow. 
My mother is retired and rents after selling her home. She would not qualify for a mortgage if she bought another house even though she has cash assets. She would have to buy the house cash.

[Missy B]

If you're paying cash and the question is should you empty your reserves to buy it, that would depend on how comfortable you feel with your sporadic income.

If you're looking to obtain a mortgage, unfortunately brokers don't care that you have liquid assets to pay for it. They want to see W-2 income, which is ridiculous since someone who relies on W-2 income could lose 100 percent of it with a layoff, downsizing, firing, etc. You can point to consistent 1099 income for many years, presumably, and will never lose 100 percent of income since you have multiple clients. This obvious logic doesn't work, however. They want to see W-2 income.

Yeah, I ran into this when I was looking to change lenders. I had income, which was low the year before as I had been merrily writing off more than usual. My gross income was still high. I had been self-employed for almost twenty years at that time. It is a rental property, and I had changed tenants and increased the rent, and reduced expenses. I had enough liquid assets to discharge the mortgage as well. And rates were sitting at 200 basis points below where my current rate was.
I was completely unacceptable as an applicant. The combination of my self-employment and investment property status ticked all their risk boxes.
I had a happy ending, as my existing lender gave me a competitive rate -- only 10 basis points higher than the lowest rate being offered by the independant lender -- and my payments dropped by $200 a month despite having to go from a 40yr to a 25yr amortization (Canadians will remember that)

I talked to some of my self-employed/business owning clients about my experience. One guy who owned a brokerage firm described how the bank grilled him for 5 years of tax returns for the business he owned and looked at him like he was Mr. Risky, while one of his employees went in with his 2 week payslip and got a mortgage no trouble. The bank was able to tick the employment status box, so no problem. But they never check the health of the business that is employing you. Which is hilarious and fucked up.

As I said to my client, I'll never be sacked with two weeks notice because some employer can't make payroll.

The banks had no discernment before the financial crises, and they still don't.