When it comes time to sell your home and purchase a home as a retiree, you might find that things are a little different than they used to be. Lenders have gotten stricter in some ways, and they’re typically looking for significant income on a consistent basis before they’re willing to underwrite that next home purchase.
While it may be tempting to use as much cash as you can to buy your next home, avoiding the hassle of working with banks and lenders and dodging all of the red tape, we don’t recommend it. Life in retirement is much easier with cash reserves, and there are plenty of options for you to get financing.
While you can’t avoid the paperwork and the underwriting process, you can take advantage of great rates on mortgages and financing, giving you more freedom with your money over the years. That means more money to travel, go on adventures, and see the world!
It can seem tricky for a retiree to buy a home and frustrating if you have plenty of money, but very little income. Having a good credit score helps, as does low monthly debt and a sufficient down payment. But lenders will typically look at your tax returns to see what income that includes. It may have Social Security, pension income, dividends, and interest, but the taxable income alone may not be enough to qualify for a mortgage. But there are still options!
You can use your retirement accounts to pull cash in, taking a distribution over the course of a few months to help you qualify for the mortgage (and as long as you put the cash back within 60 days, the distributions won’t be taxable under most retirement account rollover rules). Lenders may also want to see that you could continue those distributions if you had to for at least three years.
Beyond that, you might also be able to qualify for a mortgage for your new home based on your assets in a brokerage account or IRA. The statement of assets you provide might be sufficient to allow the lender to feel comfortable that you’d be able to cover mortgage payments over the life of the loan. And finally, you might be able to take a non-mortgage loan that’s a loan against your brokerage account and purchase the home that way.
As you can see, there are a wide range of options, as well as many different loan programs dedicated to retirement age homebuyers. A mortgage gives you more freedom with your cash, more ability to be flexible as the years go by, and plenty of opportunity to enjoy your retirement! Here at Blue Vista Realty, we have a fantastic base of knowledge on every topic related to mortgages and financing, so don’t hesitate to contact us and ask!