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You are mistaken OP, you can't be denied a mortgage because of your age, it's discrimination and lenders do not want to be sued. Retirement income is not only accepted by banks, but it's reliable and if you get social security you can ask them to count up to 125% of any untaxed amount.
You can get an FHA loan and any age, but you will be better off getting a regular mortgage that does not have mortgage insurance for the life of the loan, many banks are competing with FHA now with low down payments and matching low interest rates.
Sorry to hijack this post, but THANK YOU Mr. rational! My husband is retiring in 9 months, I am a home maker, and I too have heard this about not wanting to give a mortgage to retirees based on retirement income. I am 17 years younger then my husband so if we HAD to I can go towork to make up any gap. However the idea that they won't let us get a mortgage was worrying me (we have owned our house here for years now but want to move badly). I know it varies case to case but this post made me smile (FYI our income will be around $70k after he retires, he's thinking about maybe taking on a part time job for fun and both of us have all our scores over 800)
What you are hearing is a myth and uninformed gossip. Go ask a lender if they have an age limit. As long as you qualify for the payment with your debt to income ratio you will be able to get a mortgage. IF you are denied because of age, that's a good thing because you can sue and use the proceeds to get a free house.
Two federal laws, the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA), offer protections against discrimination.
The ECOA forbids credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or whether you receive income from a public assistance program. Creditors may ask you for most of this information in certain situations, but they may not use it as a reason to deny you credit or to set the terms of your credit.
The FHA also forbids discrimination based on race, color, religion, sex, national origin, handicaps, or familial status.
Background:
I am retiring in 2 months. I currently rent an apt. I have no intention of staying here but am (1) willing to stay approx. 6 months till my federal retirement funds go through the slow federal process and (2) willing to stay since I'm still trying to find a place I want to rent or buy. i have been retired from the govt for 2.5 years so I have been through this
I would prefer to rent in various locations - sort of like traveling the country in an RV but one apt/lease at a time with some house sitting gigs along the way. However I'm held back a bit by pets that don't travel well. think renting is the way to go unless you are set on a place
So I'm considering buying in a location that (1) I know I won't live "forever". recommend don't do this. I bought at m last duty station in FL and my house has not recovered to what I paid for it. My timing was bad but I thought in 11 years the market value would return to what I paid. 2006 was a bad time to buy down here. Now if you know you will live there forever who cares? So if buying I'm trying to stick to locations where I think the market will allow resale (an iffy proposition in more rural areas of the Midwest).
The Dilemma - I have recently become aware of the fact that many lenders won't lend a mortgage to retirees? So while my mind was still sort of blown and digesting this, I see a post on the Retiree's board here about problems renting as a retiree. Because you don't have a job/income. i found this to be true with USAA I just tried to buy a small ranch near my son in TN that I can afford and with excellent credit and plenty in market funds and no debt but the mortgage but USAA would not approve due to lack of income I had intended to rent the house in Fl out but they said no.
I find this amazing. Do retirees just - stay exactly where they are on their last day of work in some sort of game of musical housing? I find that ridiculous. it seems to be that any for me. Luckily I love my house and location but family health needs and desire to go back home make me want to make the move before I am older
But I called USAA where I have auto insurance and they also do mortgages etc. - the guy said it was basically true. No mortgage based on retired income. So....if you aren't wealthy enough to pay cash you have die in whatever location you are?
So I'm going to have trouble getting a mortgage and trouble renting. WTF.
When retiring from the federal govt you basically live with a rough estimate of what your final annuity will be - so no "pay stubs" - for about 6 months. You can probably get an official letter saying pretty closely what your final will be.
And I feel so stupid! Because all this time while carrying this estimate of my final monthly budget in my head with an idea of what I would be willing to spend on housing - I just realized that with my current pay I would have no problem qualifying for whatever, but with my retirement annuities I may not.
I need some recommendations please.
I thing my various annuities (fed annuity, air national guard annuity, soc sec supplement which I only get till I'm 62) will gross out at about 55,000? I also have TSP/401k which apparently mortgage lenders don't care about.
Last day at work Oct 29. Currently Renting. Add into the mix I'm driving a very old car. I rent when I drive somewhere. So I need a new car. I have thought I wouldn't mind working say 15-20 hours a week at a min wage job that was totally no career low stress both for a car payment and to keep me socialized but there is no guarantee when or if that will happen so.
Timing - my lease runs out Sept 30. I can go month to month for an extra 80.00 a month or 6 month lease at what I'm paying now. 30 day notice on month to month, 60 days on 6 month. The odds of me finding a ruralish small house to rent seem slim as I have been watching craigslist and Zillow for awhile. There are no properties in the one area I feel has a good resale market that I want to buy right now. The market is tight and anything not overpriced goes fast - since I'm over 8 hours away and still working I can't roll to that very well.
Do I wait till all is said and done to buy a car? Will I have problems with a loan on that too? having been there I would pay cash for a new car but a reliable one. Live on your retirement level and see how it feels. It will take a few months to get used to retirement. During this period I culled through all my stuff and worked on regaining healthy habits. My daughter got me a dog and we walk a lot.
Going forward - I have no idea of timing pitfalls, other pitfalls, options.
Help?
Suggest you give yourself some thinking time and cut back possessions to meet your needs plus those special memory pieces. During that time make trips to intended location and talk to local lenders. They may work with you better than usaa
Will admit that I do have a mortgage and that debt counts against my numbers so don't get a mortgage unless you are in a good place to sell
Last edited by theoldnorthstate; 09-02-2016 at 07:49 AM..
My husband retired from the fed govt. Prior to his retirement date, he received a letter giving an approximation of his retirement pay plus the amount of his "bridge payment". These amounts proved just slightly lower than what he actually does receive. In 6 months, he will apply for social security at age 62. The bridge payment ends then. Social security will be higher than the bridge payment so we are doing fairly well.
We just recently bought a new vehicle, new - and qualified for the 0% financing and even after that, we still are pre-qual for buying an investment property.
With your expected income, you should have no trouble getting a mortgage assuming your credit is good. We do not carry any balance on credit cards and pay all bills on time with automatic withdrawals/payments.
I love USAA - but not for mortgages. OP - call somebody else because if USAA said that retirees can't get mortgages, that's baloney. We've gotten one refi and one mortgage since we retired - and I'm not even old enough to collect SS yet, DH took the lower SS at 62.5, and neither of us have pensions. We qualified based on total assests, 401k RMD's, very little debt and 800+ credit scores.
I'd also suggest holding off on the new car until this is settled.
You are mistaken OP, you can't be denied a mortgage because of your age, it's discrimination and lenders do not want to be sued. Retirement income is not only accepted by banks, but it's reliable and if you get social security you can ask them to count up to 125% of any untaxed amount.
You can get an FHA loan and any age, but you will be better off getting a regular mortgage that does not have mortgage insurance for the life of the loan, many banks are competing with FHA now with low down payments and matching low interest rates.
Actually, the HUD handbook does permit age to be considered if the borrower's life expectancy is less than the term of the mortgage. Hi will pull it and post over the weekend.
In order to count retirement and or pension, several things must exist. The most critical, the award letter. It should address the source of the income, the start date and the monthly amount. Then, depending upon the plan, most lenders will insist upon the borrower actually receiving the pay. Many retirement systems reward retirees to delay collection of their pension. So just because you verify Mr. Brown is eligible, it does not mean he will start collecting retirement at 65, he may wait until 68 years old for an additional 10%.
If the OP has significant assets, you could not be earning a dime and use an asset depletion program. Let's say you have 1M in assets (of which none are being used to buy the home). Take 1M and divide by 360 (number of months for loan) and that gives you an income of $2777. That would be the income we use to qualify you for a new mortgage. Different types of assets are calculated differently (stocks, money markets, 401, etc). But it is entirely possible.
Use *less than* what you net from the sale to buy the retirement place.
Add the rest to your investments. Try to avoid having a mortgage at all.
If the target is some other city, especially if one you don't already know all about,
plan to RENT there for the first couple of years. Then buy (or not).
I know the city we are moving to. I lived 60% of my life 2 hours north of there and have been there many times. The only thing I don't know is the individual neighborhoods but my family up there is going to do recon work for us and google maps will help too.
The only way I would want to rent is if we end up deciding to build since that'll take awhile. My concern is finding a home quickly after we sell this one. I hate renting, we have pets, and I plan on living there for the next 40 years so I'd say renting is not for me.
The only way I would want to rent is if we end up deciding to build since that'll take awhile.
My concern is finding a home quickly after we sell this one.
I hate renting, we have pets, and I plan on living there for the next 40 years...
Thanks for chiming in. No its not age discrimination. I guess its....source of money discrimination? I did find this out there on the web. Apparently banks weren't using any kinds of assets for mortgages. So in 2011 Freddie Mac posted some new guidelines. Makes total sense. There are very few pensions out there any more so for near future retirees its all going to be 401ks. But banks didn't notice for a couple of years, then some took notice. But still some banks still don't want to use the guidelines.
But apparently it only applies to Freddie Mac loans? (I'm not sure what that means) And a lot of banks are really using it?
Getting a loan, even when you aren’t retired, depends on your income, your credit history and your assets. For retirees, assets can truly give them the edge because many won’t have a regular income except for a possible Social Security check.
Freddie Mac allows retirees and others to use income from their retirement funds and other retirement assets to qualify for a loan. According to a blog on the Freddie Mac website, the new Freddie Mac rule took effect in the spring of 2011, but it took until 2013 before borrowers and lenders started noticing it and using it.
The blog was written in May 2013 by Christian Boyle, vice president and interim head of single-family sales and relationship management, and John Watkins, vice president and single-family chief credit officer. The pair says that under the guidelines, IRAs, 401(k)s, lump-sum retirement account distributions or the proceeds from the sale of a borrower’s business can be used to determine a borrower’s eligibility for a Freddie Mac mortgage.
But there is a caveat: While the new computations can help retirees qualify for a mortgage or refinance, experts say there's a scarcity of loan officers who know about the formula or who are willing to use it.
Syndicated real estate columnist Ken Harney wrote about these favorable new guidelines in May. What happened next was shocking. Scores of retirees rushed to their banks to apply for mortgages but were turned back by bankers who were unfamiliar with the new rules. Harney says he received about 100 emails from retirees around the country who'd been rejected.
The new rules, however, just might make all the difference — if you can find a loan officer who's willing to do the necessary legwork. Jeff Lipes, a past president of the Connecticut Mortgage Bankers Association, says the new calculations to boost retirees' eligibility go like this: Let's say a retiree has $1 million in an IRA or 401(k) and wants a 30-year fixed-rate mortgage. Lenders calculate 70 percent of that $1 million (the balance is reduced by 30 percent to account for market volatility; no rate of return is assumed). They divide that $700,000 (that's 70 percent of $1 million) by the term of the loan (such as 360 payments for a 30-year mortgage).
Using this formula gives the borrower an extra $1,944 to show for monthly income. So consider Eberle as an example. That $1,944 in assets would be added to his $2,400 monthly Social Security benefit, almost doubling his income and enhancing his ability to qualify for a mortgage. (By the way, borrowers aren't required to tap those retirement assets.)
A question I have is - I have TSP then about the same amount in a regular Morgan Stanley account that is just money from savings and my mother. Will that even count, should I find a banker willing to use the "new" guidelines since its not a retirement 401k?
Yes, the 6 month lease makes sense. But it does reduce my ability to rent since that happens sort of fast. I'm more likely to have to bust my lease which I think I'm just going to have to suck up. And buy an older "new" car than I as planning.
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