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So this is the skinny, my mom (68) was laid off her job of twenty years earlier this year. She decided, at her age, to just go ahead and retire since few if any employers would hire her and pay her anything close to her previous salary. She gets 2k per month from SS. She got started late with 401k (her previous employers didn't offer it until she was in her late 40s or early 50s) and has a few stocks. Neither can be considered a big income source. She decided to sell her townhouse in NYC and relocate to Austin Texas area to be with me and my family, netting about 200k. She also has some money in regular savings accounts. Her credit score is in the 800s and she has no debt.
Today she applied for a loan with my credit union and was told that her debt to income is too high since the housing payment would be 70 percent of her income. She woukd have to put down a substantial amount of money (she didn't want to spend the lions share of her assets on a house, and instead wants to put down 30 percent) AND find an inexpensive house. Problem is the affordability train has left the station down here. There are few if any places I'd have my mother live that offer sub 200k houses. In addition, competition is extremely fierce in that price point.
So my question is what other options does a woman with some assets, a sterling credit score, and no debt (yet not enough income) have?
Spending 70% of your income on a housing payment is dumb even if you could get approved for it. You still have to pay utilities, maintenance costs on the home, food and other living expenses, etc.
So this is the skinny, my mom (68) was laid off her job of twenty years earlier this year. She decided, at her age, to just go ahead and retire since few if any employers would hire her and pay her anything close to her previous salary. She gets 2k per month from SS. She got started late with 401k (her previous employers didn't offer it until she was in her late 40s or early 50s) and has a few stocks. Neither can be considered a big income source. She decided to sell her townhouse in NYC and relocate to Austin Texas area to be with me and my family, netting about 200k. She also has some money in regular savings accounts. Her credit score is in the 800s and she has no debt.
Today she applied for a loan with my credit union and was told that her debt to income is too high since the housing payment would be 70 percent of her income. She woukd have to put down a substantial amount of money (she didn't want to spend the lions share of her assets on a house, and instead wants to put down 30 percent) AND find an inexpensive house. Problem is the affordability train has left the station down here. There are few if any places I'd have my mother live that offer sub 200k houses. In addition, competition is extremely fierce in that price point.
So my question is what other options does a woman with some assets, a sterling credit score, and no debt (yet not enough income) have?
Thanks a lot. She's very disappointed
Tell her to put $200K down and buy a $275K home and finance the $75K.
Not too many choices, but here are a couple. One, can you buy a home for her and have her make payments to you as rent? Two, can she rent an apartment, get a 'fun' job somewhere and build up her down payment fund? Three, can she find a condo or even a nice mobile home?
Not too many choices, but here are a couple. One, can you buy a home for her and have her make payments to you as rent? Two, can she rent an apartment, get a 'fun' job somewhere and build up her down payment fund? Three, can she find a condo or even a nice mobile home?
The first one is a horrible idea - if she is paying 70% of her income towards rent she is likely to eventually default, and this is going to ruin your relationship. Don't mix business and family, but ESPECIALLY don't do it if one party can't even afford the deal!
another option assuming she's in good heath and hopes to live out her retirement in the new home: reverse mortgage for purchase.
she puts down less than 50% of purchase price in cash, the reverse mortgage pays the rest.
this way she buys the $200k home and doesn't have to pay mortgage at all. hopefully her 2k/month social security more than covers her monthly taxes/insurance and living expenses. keep her 401k, stocks, savings, and the $100k+ proceeds from the sale of her departure hone untouched.
the longer she lives, the better deal it is- since she's essentially living off her down payment for life. she'll have a nice place to live out her retirement. social security income that covers her monthly expenses so she's not stretched so thin. plus peace of mind knowing she has money in the bank and no mandatory mortgage payment the rest of her life.
and if YOU want the house at the end- make payments on the reverse mortgages. on a fixed income why should she make front loaded interest payments on a traditional mortgage at her age anyway?
unless of course the idea is to build up equity to eventually sell the house to pay for a nursing home at some point if necessary....
another option assuming she's in good heath and hopes to live out her retirement in the new home: reverse mortgage for purchase.
she puts down less than 50% of purchase price in cash, the reverse mortgage pays the rest.
this way she buys the $200k home and doesn't have to pay mortgage at all. hopefully her 2k/month social security more than covers her monthly taxes/insurance and living expenses. keep her 401k, stocks, savings, and the $100k+ proceeds from the sale of her departure hone untouched.
the longer she lives, the better deal it is- since she's essentially living off her down payment for life. she'll have a nice place to live out her retirement. social security income that covers her monthly expenses so she's not stretched so thin. plus peace of mind knowing she has money in the bank and no mandatory mortgage payment the rest of her life.
and if YOU want the house at the end- make payments on the reverse mortgages. on a fixed income why should she make front loaded interest payments on a traditional mortgage at her age anyway?
unless of course the idea is to build up equity to eventually sell the house to pay for a nursing home at some point if necessary....
I'm not sure the reverse mortgage option would work that way (I admit I don't know a whole lot about them) - it's my understanding that there are hefty fees involved with obtaining one and I thought you had to have more equity than someone just purchasing a home.
a $2000 a month SS check is roughly equal to an $11 per hour job.
If she doesn't want to part with her savings, her loan limit would be VERY low.
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