Can I qualify for a mortgage without a job?
Six years ago I left W-2 employment for work life balance, I have been doing 1099 consulting earning between 10K-90K. In 2011 I will finalize a divorce after 30 years of marriage and sending a child to college. I will probably look to return to W2 employment for health insurance purposes.
My personal credit score is 726, negatives are a couple of late payments over 5 months ago. The only debt I have is usually $1000/mo credit cards which I pay off each month. I have $1,700,000 in non retirement assets and $400,000 in retirement assets.
If I do not have a job would I be able to qualify for a $300,000 mortgage using only my assets? If you have to have a recent job history,y how long would I need to work before applying for a mortgage (before leaving work I had 25 years of W2 employment).
You should get a job before you worry about a house. It's a pretty bad economy (if you haven't noticed) and you have three strikes against you:
First, I would imagine you're about 50 years old. There's a lot of age discrimination in the workplace. Second, there's been a transition over the past decade for companies to rely upon contractors or temp workers so they don't need to pay benefits. Essentially the type of work you've been doing. Third, you've not held a steady job with an employer for 6 years. Businesses are reluctant to hire people who are not currently employed.
I don't say this to discourage you, just to point out that in order to succeed, you may need the flexibility to relocate. Loan officers (I presume) are going to want to see some employment history before they approve a loan. Additionally, when you get a job (to get back into the workforce) it may not be one that you want to keep, so you could easily find yourself applying for a different job in a couple years.
Just things to keep in mind. Stable job, then house. Renting is acceptable.
Interesting article in the WSJ:
If you can show steady income from your consulting, I don't think not necessarily being employed in a typical "job" would be a problem. You've been employed, but just self-employed. What is critical is to demonstrate a continued steady stream of income.
I would gather your past two years of tax returns and go see a local lender. Talk over your situation and see what they say. What is the worst that can happen from just talking with a lender about your situation?
Also, I think your 1.7M of assets would factor heavily in any lending decision. Are these liquid assets that you could tap in the event of a financial emergency?
I guess this could be considered a dumb question and I know it's none of my business, but:
if you have 1.7M in non-retirement assets and you want a .3M house, why not purchase it outright and not worry about a mortgage? Being a cash buyer is a HUGE price advantage - saying "I have cash and I want to pay $X and I want to close on MM/DD/YY, here's proof in the form of a letter from my bank saying I have the assets to back it up" gives you a LOT of leverage. I don't know what % you can usually knock off of a purchase, but having cash outright makes a lower $ value offer more attractive than, say, "Please take this amount of money but I need to make sure my bank agrees and I can back out and take back my deposit if I get refused because of some random credit glitch or arcane bank rule or I didn't account for the astrological sign of my loan officer's dog."
Also, if you've been consulting, that makes you self-employed and it sounds like you've been doing it long enough to have provable income from it - I don't remember, but don't they average the previous 3 years' income for a decision on that?
Just a thought: talk to a mortgage consultant, see what they say about your situation. You may need to deal with that 5 month old late. If you can get pre-approved, go house shopping. Discuss with your buyer's agent (interview them until you find one you're comfortable with) how to put in the offer. "If I were to offer cash instead of going the mortgage route, what do you think an appropriate number would be?" Lower cash offers can beat higher mortgage-conditioned ones.
Most financial institutions that handle a net worth such as your have specialy lending divisions that will use your assets as a basis of qualification.
However, do you claim dividend & interest income? Dividends & interest can qualify for a mortgage, you need to have a 2-year history of receipt and be expected to continue for the first 3 years of the mortgage (so if your assets have gone from $3.7 -> $2.7 -> $1.7 in each of the last 3 years then that would pose an issue for an underwriter). If a portion of the assets will be used for the down payment, then the qualifying income would be reduced by whatever dividend/interest income that portion of your assets has been generating.
If you've been doing 1099 consulting work for the past 6 years, and if you are still doing consulting work today, then a 2-year average of the consulting work filed on your tax returns (which I suspect would be on a Schedule C) could qualify. If you no longer are doing that anymore, then depending on how long the gap is between your 1099 consulting work career ended and you going back to work as a W-2'd employee, and if it's in the same field, then just as little as 30 days on the job can qualify but if you haven't been working for awhile (most lenders define that as 60 days) then you will likely find that you need to be back on the job for 6 months before it can qualify.