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Very much a local bank thing and the type of loan being sought and what the bank intends to do with it. Ours was in a pool not to be sold and kept in their portfolio. Underwriting standards vary with the ultimate source of the funding. We were fortunate in that the bank also held the note for the construction company doing the building and they wanted them done.
We are planning on moving to Tennessee later this year and building a new home. Would like to pay 100k down and get a 15 year mortgage for about 130k. But the only income we have right now is my wife's social security, my spousal social security and a very small pension. So getting the mortgage would be tough under those circumstances. Would prefer to not start my social security until 70 and would prefer to not take the 130k from the IRAs due to taxes.
Right now kicking around moving 200k from the IRAs that is in bond funds into two fixed 15 year annuities. This way we would increase our income for qualifying for the mortgage and just pay taxes as we receive the annuity payments. And by matching up the annuities length to the mortgage length, there would be more than enough $ coming in every month to cover the mortgage, taxes, insurance, etc. When I hit 70 in 3 1/2 years, our income with get a nice increase from my social security and of course, RMDs.
Although we had a substantial portfolio (much more than the home value) and we withdrew monthly it was not accepted as income as we controlled the timing and amount. I had to setup a periodic withdrawal through the brokerage company systems before it was counted as regular 'income' sufficient to meet the standards.
After the mortgage was approved and closed I changed the withdrawal parameters to suit my plan.
As near as I could tell there was no real underwriting done by the originator anymore, they just have to check all the boxes and get the ratios so the loan can be sold.
Although we had a substantial portfolio (much more than the home value) and we withdrew monthly it was not accepted as income as we controlled the timing and amount. I had to setup a periodic withdrawal through the brokerage company systems before it was counted as regular 'income' sufficient to meet the standards.
After the mortgage was approved and closed I changed the withdrawal parameters to suit my plan.
As near as I could tell there was no real underwriting done by the originator anymore, they just have to check all the boxes and get the ratios so the loan can be sold.
Yes and fortunately for us are loan was one of the small percentage not intended to be sold.
As someone who has been self-employed for over 30 years, I have many memories of challenges borrowing particularly during the early years of self-employment. I've never known of a situation where assets mattered in the loan underwriting process. It's all income. And in the case of rental income, my experience is that underwriting assumes 25% vacancy and adds back depreciation expense. I had no history of any vacancy yet still had to take the 25% vacancy factor hit.
For the self-employed, it's prior 2 year's tax return self-employment income plus current year profit averaged. For someone in the uptick stage, that calculation will also be less than what you're currently generating.
When I went self-employed, I did some borrowing right before because I knew it would be rough for several years. That would be my advice to anyone approaching retirement who might have difficulty particularly if they're delaying social security benefits and living off of assets for a transition period (note: me potentially talking to myself.)
Although we had a substantial portfolio (much more than the home value) and we withdrew monthly it was not accepted as income as we controlled the timing and amount. I had to setup a periodic withdrawal through the brokerage company systems before it was counted as regular 'income' sufficient to meet the standards.
After the mortgage was approved and closed I changed the withdrawal parameters to suit my plan.
As near as I could tell there was no real underwriting done by the originator anymore, they just have to check all the boxes and get the ratios so the loan can be sold.
I find this very interesting as I do the same; I take it out of the IRAs as we need it. I had figured that setting up a periodic withdrawal would not be acceptable as it can be changed at any time. As we move forward with our plans, this certainly be discussed with the mortgage people as I would rather do that then set up a couple of annuities.
No actual experience but I think you have a problem. I think the Federal guidelines for mortgages stresses dependable monthly income and pays little if any attention to the assets you have.
You can probably get a mortgage if taxes and mortgage payments for the year are under 25 or 30% of your retirement income.
If your retirement income is not enough (and you may need several years of tax returns to prove) I would try and get the mortgage before you retire. I do not think it matters if you are retiring in a few months and the income goes away.
Thus buy the home before you retire.
Another option might be to refinance your current home if this will give you the extra cash to buy the retirement home.
If buying a resale you might be able to get a loan from the seller or a rent to buy.
Seems that there is no good answers for your problem.
No actual experience but I think you have a problem. I think the Federal guidelines for mortgages stresses dependable monthly income and pays little if any attention to the assets you have.
You can probably get a mortgage if taxes and mortgage payments for the year are under 25 or 30% of your retirement income.
If your retirement income is not enough (and you may need several years of tax returns to prove) I would try and get the mortgage before you retire. I do not think it matters if you are retiring in a few months and the income goes away.
Thus buy the home before you retire.
Another option might be to refinance your current home if this will give you the extra cash to buy the retirement home.
If buying a resale you might be able to get a loan from the seller or a rent to buy.
Seems that there is no good answers for your problem.
I would suspect this varies between lenders and different States. In NY, I was not able to get a mortgage based on assets. End of story, did not matter how much or of what type. I had to start social security and also upped the down payment to 40%. A mere 4 months of waiting and the loan was approved.
Was told the same
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