Obtaining a Home Loan While Retired
The press is filled with stories about first-time home buyers and Millennials obtaining home loans. At the other end of the spectrum are aging Baby Boomers and retired people – what about mortgages for them? Nations Lending does many loans for older U.S. citizens.
Obtaining a typical mortgage while retired is certainly doable. It is dependent on the same guidelines, for the most part, required by the mortgage industry while you are employed or self-employed. Borrowers qualify based on their ratio of monthly debts divided by their monthly income, having an acceptable credit history, and having the cash to cover the down payment and closing costs.
Of course if you’re retired your primary source of income is social security, dividends & interest, pensions, and possibly some self-employment income. A good percentage of retirees have decent cash and can put in a large down payment. In that case, of course, the lower the qualifying income needs to be. As noted above retirees who are continuing some form of self-employment will be able to use that income for qualifying for the mortgage via the net profit, not the gross income, as reported on the IRS’ Schedule C form.
Many retirees opt for a reverse mortgage. It does not require traditional income qualifying and does not require making any mortgage payments. There are certain restrictions, such as the borrower needing to be older than age 62, and the home must be a principal residence of one to four units. The homeowner is still responsible for property taxes and homeowner’s insurance. When you die, your heirs may inherit the property; however, the reverse mortgage must either be paid off with cash or replaced with a conventional mortgage.
If the home is sold to pay off the reverse mortgage, your heirs are entitled to the equity remaining in your home. There is no penalty if and when the reverse mortgage is paid off. If you move out of your home, you must pay off the reverse mortgage within six months by either refinancing it or selling the home.
Be sure to ask your Nations Lending originator about reverse mortgages, and for more information visit http://www.nationslending.com/page/reverse-mortgages-