Getting A Mortgage In Retirement
It’s not so uncommon when you hear someone who retired wanting to pack up their things and move. While it can be an exhilarating time, it can also be rather difficult, especially if their planning on buying a new house altogether. Lenders are barred from discriminating against older people who are trying to apply for a loan. Despite having the advantage of not having to worry about discrimination, retirees are still going to face some difficult challenges in obtaining a mortgage.
Read on to learn a few tips about securing a mortgage while in retirement.
Purchasing a New Home Isn’t Always the Best Decision
Purchasing a mortgage is a huge undertaking for anyone, regardless of whether they work or not. Should someone even get approved for one, it’s not always the smartest financial decision to make. A lot of retirees these days have a lower income than they did while they were working. Due to this, many people tend to underestimate how long the money needs to last for them. Adding a mortgage payment can deplete what little money is there even faster, which can make it difficult to live comfortably.
Regardless of age potential home buyers need to do their homework. With that said, make sure you carefully evaluate your finances before applying for a mortgage. Buying a home involves a lot more than just the monthly payment. You also need to consider property tax and homeowner insurance. In addition, you need to plan for other monthly expenses, which include power, water and even unexpected medical bills.
In addition, remember to evaluate whatever debts you have as well. Having debt not only lowers your credit score but can also significantly hurt your chances of securing a mortgage. Finally, having too much credit can also work against you. It's recommended that you utilize only 20 percent of your total credit. Lenders like to see that you know how to manage your credit responsibly.
Showing the Right Amount of Income
With retirees no longer working, they are no longer able to show any traditional income. However, having a job is not a requirement for applying for a mortgage and here’s why; any income that is received from pensions or a social security account will count. In addition to that, withdrawing from a retirement account is also counted. Aside from showing a stable income, retirees must also show a low debt-to-income ratio. It may not be a challenge for some people, depending on how much they have and how much income they will have in retirement.
Before signing a mortgage application, talk to a few lenders about their income and debt-to-income ratio restrictions.
It's crucial to remember that when you apply for a mortgage, lenders consider a variety of variables.
They’ll want to look at your credit score, down payments and occupancy status. If you’re retired and looking to purchase a mortgage, make sure you’re 100 percent prepared for it. It’s a long and bumpy road, but the payoff is worth it.