Can You Buy a Home if You Are Retired, Yes You CAN!
This blog is going to deal with the details around how to buy a home when you are retired. I often get told by clients that they are too old to get a mortgage because no matter what their age the are going to die before the loan comes to term. My answer is always the same yes you can and who cares if you die, seriously why are you so worried about a bank’s money? Let’s be honest you will most likely not die before the mortgage comes to term. If you do, so what! In case number one, the bank takes the home back from you and they probably have credit life against your mortgage to hedge against your untimely demise so they won’t be out any money and if the home has appreciated by a significant amount, then your heirs should do everything in their power to pay the loan off or sell the home and split the money. Now that we have established that there are no losers (except for the mortgagee) in this instance it si time to discuss how to buy a home in your golden years.
There are several options available to our wisest citizens starting with conventional lending, yes, it is actually age discrimination to base lending terms on your age. Also, there are two types of FHA loans available to you in case you want to purchase a home the standard FHA mortgage and a Reverse Mortgage we will address the Reverse Mortgage in a later paragraph. Now that we have established that you are never too old purchase a home lets talk about the qualifications required to get you qualified.
First, we will discuss the income types required for a standard FHA loan and a conventional loan, the income requirements are very similar for the two loan types. The most common type of income without an expiration is social security income and pension income. Each of these income types do not expire and typically payout for life this income has very little scrutiny and typically requires an award letter and minimal proof of receipt and that is all. Another very common type of income is retirement income from accounts like 401Ks, IRAs, & investment portfolios, these income types receive a little more scrutiny. First of all they require a recurring withdrawal, meaning you need to have a consistent deposit into your checking account every month. Then we need to prove that the account has continuance, continuance in this case means that the deposits into your account have to be multiplied by 36 and the resulting number must be less than the balance in your account. Also, they usually require a 30% deduction to the balance in your account to make up for any fluctuations in the market. If you are paid in dividends or interest income please see this blog.
Finally we can discuss a reverse mortgage for purchase of a home, with this type of loan there is very little scrutiny paid to your income. With this loan the buyer only has to have a down payment and they are given the home with out a traditional loan. For instance depending on your age you may only have to put down 30% of the homes value and you will get a home with out a loan payment and you are only required to pay for insurance and taxes. You read that correctly this transaction actually adds the interest to your remaining balance every month the equivalent interest accrued is added to the balance. So there are no payments and the amount after your down payment accrues interest so upon your death or moving out of the property for more than 90days the bank will call your loan and give you two options, give the FHA the house or pay it off and sell the home. You are reading this correctly you move into a home after paying $.70 on the dollar for the home and you do not have a mortgage payment ever, you just cover taxes and insurance.
I hope that our most wise of the population are super excited to read about their home purchasing ability for many homes. As always if you have any questions Think BLINK! And give us a shout!
