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I am interested in purchasing a second home in another state. The purchase price of the new home is going to be somewhere between $100k and $250k. I have a home now and intend to keep it. My credit score is 665 and rising slowly. My current home is worth around $550k and I owe $287k on it. I have approximately $400k in IRA + 401(k) funds and I'm assuming a 10% return on those going forward. I am retiring soon and my pension will be about $25k per year.
Do I have any chance of getting any type of mortgage on the second home, or will I need to pay for it with 100% cash? Paying 20% down or even 50% down if necessary would be no problem. I have some other debt (credit cards, car loan) but could pay those off if it means I could get a $250k house with $50k down. I know that my debt-to-income ratios would be atrocious, but since I have assets and substantial home equity, would a lender be more flexible? Thank you!
I am interested in purchasing a second home in another state. The purchase price of the new home is going to be somewhere between $100k and $250k. I have a home now and intend to keep it. My credit score is 665 and rising slowly. My current home is worth around $550k and I owe $287k on it. I have approximately $400k in IRA + 401(k) funds and I'm assuming a 10% return on those going forward. I am retiring soon and my pension will be about $25k per year.
Do I have any chance of getting any type of mortgage on the second home, or will I need to pay for it with 100% cash? Paying 20% down or even 50% down if necessary would be no problem. I have some other debt (credit cards, car loan) but could pay those off if it means I could get a $250k house with $50k down. I know that my debt-to-income ratios would be atrocious, but since I have assets and substantial home equity, would a lender be more flexible? Thank you!
A couple of comments on what you presented:
Will you have any other income besides the $25k pension in retirement? Will you be drawing off the 401K, the IRA, or getting SS and if so, when will that begin?
Your debt is missing a few things. Property taxes and insurance also play into your DTI. You may be able to qualify for a mortgage but you might not like the terms including what down payment you'd need in order to make them work! Talk to some lenders.
If you're intending on retiring in the near future, $400K is really marginal in IRA/401K funds. Most people retiring would prefer to have 3 times that amount or more. And a 665 FICO score is an indication that buying a second home without selling the main residence would push you over the top.
My suggestion--forget the second home, and save, save, save until it hurts. You've got some making up to do.
Also, let's say you do get approved for that second mortgage. That's just the beginning. Obviously you have to maintain the second home as well as the first going forward. Your expenses in terms of housing could be double if not more. Insurance, utilities, property tax, reserves for repairs...you'll be drawing on your assets soon enough as it is, not adding to them.
$25k pension in retirement?
any social security monthly income?
will you have a second job or part-time job as a consultant in your current same field?
-- 20% down may be doable with a 665 middle credit score. 700+ is preferable.
Many people I heard get bored when retiring. They have more time available so there's more time to spend money.
With a 665 credit score, I wouldn't loan you $5 dollars. Sorry.
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