An increasing number of American citizens are taking advantage of mortgage programs that enable them to acquire financing for their desired property at low-interest rates and tax breaks – things that are part and parcel of almost all mortgage programs.
Suppose you’re considering getting a mortgage in retirement. In that case, it is crucial to carefully evaluate your profile, including your credit score, income, and overall ability to repay your loan in time.
According to one of Dallas best mortgage lenders, “Retirees should consider all their housing options and choose the one that best fits their needs. For some people, buying a house before they retire may be the best idea, while for others, renting makes more sense. So it depends….”
We know you have many questions about getting mortgage approval in your retirement. Thus we have decided to create a comprehensive guide that will answer all your questions in one place.
Can You Get a Mortgage in Retirement?
The short answer to this is, yes, you can.
Remember, no age is too old to acquire a mortgage or buy or refinance a home. You can move forward with your home loan application if you have a good profile. If we’re basing eligibility on age factor alone, a 35-year applicant and a 65-year applicant will have the exact same chances of getting approval for a home loan.
Speaking of the eligibility criteria, your mortgage lender may assess your application on different factors (age being not one of them). We’re going to list down a few of those factors here for you:
- Your credit score: You need at least a 620 credit score if you plan to apply for a conventional loan in Dallas.
- Your debt-to-income ratio: You can use this formula to calculate your DTI:
DTI = Monthly debt payments/Monthly gross income
- Details about your income and other assets: You must submit enough evidence about your income and assets to prove your ability to repay your loan.
Here’s What You Need to Consider When Deciding Where to Live After Retirement
Before you start your mortgage application, you need to decide where you wish to live after retirement. Here are a few things you should consider when deciding your future housing options:
Your lifestyle: If you love to stay active in community activities surrounded by like-minded individuals, you may want to choose a housing option that perfectly caters to this need. Similarly, some seniors like to travel a lot and want to invest in a low-maintenance home that doesn’t drain their budget. Think about the lifestyle you wish to have in retirement and choose your locality accordingly.
Your monthly income: Buying a property in Dallas is an expensive affair. If you have already retired, you must clearly know what monthly amount you’ll receive. You may also consider discussing your finances with an advisor if you’re still employed and about to retire soon.
Your needs: Seniors usually have additional needs depending on their physical and mental health conditions. This is another essential factor you should keep in mind before you finalize a home for your future living.
Home Financing Options for Seniors
In this section, we will talk about some of the home loan programs seniors can benefit from for buying a property in Dallas:
Unlike FHA and VA loans, a conventional loan isn’t guaranteed by the government. Because private lenders back conventional loans, applicants must be ready to put down a 20% down payment for a conventional mortgage. If you’re short on savings and can’t manage to pay a required down payment initially, you can choose to pay a PMI instead.
Another home loan option seniors can apply for is HECM, which is the only reverse mortgage guaranteed by the federal government. This type of mortgage is available through FHA-backed lenders, and you have to meet with a HECM counselor in order to proceed with your application.
As far as the eligibility is concerned, one needs to be at least 62 years of age. And live in the property as their primary residence. Apart from this, you must be able to prove your ability to meet the property tax, insurance, and other requirements.
HELOC is another option you can try as a senior prospective homebuyer. Which is a variable-rate loan that works more or less in the same way as a credit card. As a borrower, you will be given a line of credit and a specified number of years to draw the money. Also, you’ll be allowed a specific time to repay your loan.
Because HELOC is a variable-rate loan, your monthly payment. Will fluctuate depending on the amount of LoC you have used and the movement of interest rates associated with your loan.
If you own a house, you can also benefit from a bridge loan, which basically is a source. Of temporary financing you can use until your old house is sold.
Qualifying for a Mortgage in Retirement
Every applicant is different, and so are the requirements they must fulfill to get their loan application approved. You don’t have to submit your pay stubs and W2 forms as a retiree. Instead, your lender will ask you to supply forms to validate your income. Some of these forms include a social security award letter, retirement award letter, and federal tax returns.
You may also have to submit 2-months of bank statements, proof of recent receipts, and letters from organizations providing income.
Challenges You May Face When Getting a Mortgage as a Retiree
- Irregular income
- Accessing retirement accounts
- Income ending in a few years due to retirement
When Does it Make Sense to Get a Mortgage as a Senior?
It might be worth considering financing a new home in retirement if:
- You face physical challenges and cannot spend much time repairing/maintaining your old house.
- If you’re planning to supplement your fixed income.
- You’re looking to move to a new area with better weather and other benefits.