Freddie Mac Senior Home Buying Program
Similarly, Freddie Mac changed its lending guidelines to make it easier for borrowers to qualify for a mortgage when they have limited incomes but substantial assets.
The rule allows lenders to consider IRAs, 401s, lump sum retirement account distributions, and proceeds from the sale of a business to qualify for a mortgage.
Any IRA and 401 assets must be fully vested, and must be entirely accessible to the borrower, not subject to a withdrawal penalty, and not be currently used as a source of income.
Using A Reverse Mortgage In Retirement
A reverse mortgage is a special program that allows seniors to use their homes equity to create an income source, a line of credit or a combination of several options. With a reverse mortgage, you can:
- Take a lump-sum payment to boost your cash reserves and secure a fixed rate
- Choose regular monthly payments for the life of your loan
- Pick a set number of months you want to receive monthly payments
- Select a line of credit and use the funds as you need them
- Combine a line of credit with a monthly payment for as long as you own the home
- Add a line of credit to a monthly payment you receive for a set time period
Can a retiree get a mortgage?
Yes, as long as their income and credit meet the above guidelines.
What is the age requirement for a house?
There is no maximum age requirement for a home. However, there is a minimum age requirement of 62 if you apply for a reverse mortgage.
Can you get a mortgage with only Social Security?
Yes. As long as you can verify recent receipt of it and an award letter confirming your current award amount.
Can you get a mortgage with no job?
Yes. A job is not required to qualify for retirement mortgages.
Can you buy a house while on SSI?
Yes. However, if you are receiving survivor benefits, you must also prove youll get the income for the next three years.
Are retirement mortgage interest rates higher than regular rates?
No. Interest rates for retirees are based on the same factors as any other mortgage.
Can You Get A 30year Home Loan As A Senior
First, if you have the means, no age is too old to buy or refinance a house. The Equal Credit Opportunity Act prohibits lenders from blocking or discouraging anyone from a mortgage based on age.
If were basing eligibility on age alone, a 36yearold and a 66year old have the same chances of qualifying for a mortgage loan.
The qualifying criteria remain the same:
However, it can be tougher to meet those criteria in retirement especially when it comes to income.
Seniors should expect stricter scrutiny when applying for a mortgage loan. Youll likely have to provide extra documentation supporting your various income sources .
There may be more hoops to jump through. But if your personal finances are in order and you have the cash to make monthly mortgage payments, you should be able to qualify for a new home loan or refinance your current home.
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Or Ira Retirement Income
If you draw money each month from a 401, Roth IRA, traditional IRA or another retirement account, your lender will consider these dollars as part of your income. An IRA withdrawal, then, will boost your qualifying income. Your lender might request that you send in a copy of your most recent retirement account statement so that it can verify how long youll receive these monthly withdrawals.
When Is The Appropriate Time To Take Out A New Home Loan As A Senior Citizen
Rather than paying off their loan sum and rates or buying a new property with cash, more retirees and seniors are opting for a mortgage.
This will allow you to save money for other purposes. For senior citizens, the most expensive items are food, transportation, and longterm care.
Apart from freeing up assets, there are a number of reasons why elders might consider financing a new home purchase..
- Sizing down Empty nesters may choose to downsize in order to save money on square footage, maintenance, and mortgage payments.
- Physical exertion Cleaning and repairs can be physically demanding.
- Supplementing a fixed income An increasing number of seniors are finding it difficult to make ends meet on their limited incomes.
- Moving to a new place Retirees are leaving their home state in search of better weather, recreational opportunities, lower taxes, and other perks.
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What Else You Need To Qualify For A Mortgage
Remember, lenders will look at your entire financial situation, not just where your income is coming from. To improve your chances of getting approved for a mortgage, you should have:
- A good credit score.Conventional mortgages require a credit score of at least 620, while FHA mortgages require scores of 580. The higher your score, the more likely you are to be approved. Those with higher scores also typically get better interest rates.
- A sufficient down payment. Conventional mortgages allow down payments as low as 3%, while FHA mortgage require 3.5%. Putting down more than this can increase your approval odds, help boost your buying power, and earn you a lower rate.
Additionally, if you have other sources of income aside from your Social Security income, be sure to include that in your application. This could include things like retirement accounts or earnings from investments.
The Best Loans For Seniors On Social Security
About 30% of senior households owe money on a mortgage. The median amount owed is $68,500. If you own your home, you have an asset that you can leverage to secure a loan. You can also get a good deal if you decide to refinance your mortgage since rates are lower now.
Many lenders consider income when deciding to lend money. But this isnt effective when securing loans for seniors on social security.
This is when its important to have assets that can cover the loan. For many seniors, this asset is their home. We have four ways you can secure a loan as a senior citizen.
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What Our Clients Say
Andrew Cate from Seniors First was amazing, he managed to arrange my reverse mortgage seamlessly. Working with him made the whole process completely painless and he explained every step along the way. I have no hesitation in recommending him to anyone thinking of this kind of mortgage Thank you so much Andrrw and Seniors First!
From the outset Andrew Cate was very helpful, considerate and very informative. He was available to answer questions at all times and we appreciated his professionalism and understanding of our needs during our application. Highly recommended. Thank you Andrew from Michael and Cherie Nikolaidis
Outstanding customer service received from Andrew Cate, Reverse Mortgage Specialist who expertly guided me through the loan process and kept me informed every step of the way. Sincere thanks to Andrew and Seniors First .. the loan has been life changing.
We recently completed a transaction through Seniors First and have been very impressed with the way it has been handled. we would have no hesitation in recommending them to anyone looking to secure their future requiements for finance. In particular we were looked after by Andrew Cate who gave us great help throughout the process.
Fannie Mae Senior Home Buying Program
Both Fannie Mae and Freddie Mac have policies that allow eligible retirement assets to be used to qualify under certain conditions.
Fannie Mae lets lenders use a borrowers retirement assets to help them qualify for a mortgage.
If the borrower is already using a 401 or other retirement accounts for retirement income, the borrower must demonstrate that the income received from that asset is going to continue for at least three years.
If the borrower is not already using the asset, the lender can compute the income stream that asset could offer.
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Can You Get A Mortgage In Retirement
Yes, it’s possible to get a mortgage in retirement, even if your sole source of income is Social Security benefits. It’s common for people to think they won’t qualify just because they’re on Social Security, but in fact, the law protects you here. The Equal Credit Opportunity Act prevents discrimination by lenders based on several things, including your age and whether you’re receiving public assistance such as Social Security.
However, just because you’re receiving guaranteed income through Social Security doesn’t mean you’re automatically fast-tracked for a mortgage. You’ll still need to go through the standard mortgage application and approval process. Here’s where things can get sticky.
It Is Possible But You’ll Need To Consider It Carefully
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Most people apply for a mortgage during their working years because that’s when their income is highest and it’s easiest to make the payments. However, that’s not the case for everyone. Maybe you’re downsizing to a new home or relocating to be closer to family and need a mortgage to pull it off.
Getting a mortgage using only income from Social Security is possible, but affording a mortgage is not as easy as it might have been when you were working. There are other considerations to take into account when you’re buying a home as a retired person, too. Here’s what you need to know.
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How Can I Retire Without Buying A House
A guaranteed way to retire without a mortgage is to sell your current home at a profit and use the proceeds to rent a place to live in during retirement. Although it might seem as if you’d just be writing a check to a landlord instead of a lender, the differences between renting and owning can be considerable.
Mortgages For Seniors On Social Security
Social Security income for retirement or long-term disability can typically be used to help qualify for a mortgage loan.
That means you can likely buy a house or refinance based on Social Security benefits, as long as youre currently receiving them.
SSI should be counted along with retirement funds and other liquid assets to calculate the borrowers total qualifying income.
Since SSI is typically non-taxable, it can also be grossed up. That means the lender can increase the qualifying amount by 10% to 25% and help you qualify for a larger monthly mortgage payment.
For a lender to count Social Security income toward your mortgage, it will need to be documented via an SSA Award letter or proof of current receipt.
If the borrower is drawing Social Security income from another persons work record, theyll need to provide the SSA Award letter and proof of current receipt, as well as verification that the income will continue for at least three years.
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How To Get A Mortgage On Social Security
You can qualify for a mortgage loan even if you’re old enough to be drawing Social Security payments. You can thank the Equal Credit Opportunity Act, a federal law, for this. This law makes it illegal for lenders to consider a wide range of factors — everything from sex, race, marital status and, yes, age — when determining who qualifies for a loan. This act also states that lenders can’t charge you higher interest rates solely because of your age. This doesn’t mean, though, that qualifying for a mortgage loan when you’re on Social Security is easy. You must still prove to your lender that you can make your monthly loan payments. If you’re relying solely on Social Security for your income, that can be challenging.
Fill out the Uniform Residential Loan Application provided by the lender with which you choose to work. This form will ask basic information about yourself — your name, address and Social Security number. It will also ask you to provide information about your employment — if you are collecting Social Security payments, you will have to write that you are no longer holding a full-time job — gross monthly income and debts. If you’ve declared bankruptcy or gone through a foreclosure in the last seven years, you must indicate this, too. Send the completed form to your lender.
References
Common Myths About Reverse Mortgages
Myth: The bank will own the seniors home.Fact: Banks are not in the business of owning seniors homes. The homeowners name remains on the title and they retain ownership.
Myth: The bank can make an elderly person leave their home.Fact: HECMs are regulated by the federal government and banks are not allowed to make seniors leave their homes. In fact, the lender is more interested in having the senior stay in their home for as long as possible. Seniors are merely responsible for continuing to pay their homeowners insurance premiums and property taxes and for keeping the home in good shape.
Myth: The heirs will be responsible for repaying the loan when the senior dies. Fact: Heirs are never responsible for repaying these non-recourse loans. After the senior passes away, their estate has 30 days to sell the home for fair market value. That sale price then repays the loan. If heirs are interested in keeping the home, then the loan must be paid using another source of funds. According to the Consumer Financial Protection Bureau , heirs will never have to pay more than the full loan balance or 95 percent of the homes appraised value, whichever is less.
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The Difficulties That The Retirees And Elders Experience And Encounters While Applying For A Mortgage
While there is no maximum age for applying for a mortgage, seniors and retirees may have a harder time qualifying.
Here are some of the obstacles you could face while buying or refinancing a home:
- No consistent source of income
- In less than a few years, your income will come to an end
- Getting access to retirement assets
Income Ending In Under 3 Years
Home buyers who arent yet retired, but plan to retire soon, may hit a different snag in the mortgage application process.
When you buy a home or refinance, mortgage lenders need to verify your income source will continue for at least three years after the loan closes.
Someone retiring in a year or two would not meet this continuing income requirement.
In that case, they would not qualify for a mortgage or refinance loan no matter how high their credit score, how much credit card debt theyve paid off, or how much money they have stashed away in investments and retirement accounts.
The simplest solution to this problem? Dont tell your lender you plan to retire.
Theres nothing on your pay stubs to cue a lender off about retirement plans, so they have every reason to believe your income will continue.
Theres also no guarantee that you will retire when planned. Many people change their plans based on the current economy, their investments, or their desire to keep working.
However, youll need to be absolutely certain you can afford mortgage payments with the income youll have in retirement.
If youre in a situation where youve received a retirement buyout or your employer tells your lender about retirement plans, you may not be able to qualify for a new mortgage.
In this case, you may have to wait until youve retired and begun drawing from your retirement accounts in order to qualify based on your assets rather than your income.
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Get Advice Before Choosing A Loan
Sometimes the elderly become prey to predatory mortgage lenders. Under the Truth in Lending Act , lenders have to disclose the cost and terms of a loan along with a lot of other information. The Real Estate Settlement and Procedures Act prohibits the payments of unearned fees and kickbacks.
According to the National Consumer Law Center, equity-rich and cash-poor elderly homeowners are a big target for unscrupulous mortgage lenders. It is recommended that before signing anything, you talk with a trusted accountant or attorney about the terms and costs any potential home purchase and new mortgage.
Lee Nelson
MyMortgageInsider.com Contributor
Loans For Asset Depletion
An asset depletion loan is a form of mortgage created for people who dont have regular income and want to buy or refinance a home.
This is technically the same as a regular mortgage. The only difference is how your qualifying income is calculated by a mortgage provider.
Asset depletion mortgages allow borrowers to qualify for a mortgage based on their liquid assets rather than a steady source of income.
For retirees who dont have enough income to qualify for a new home loan or a refinance, an asset depletion loan may be a good option.
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Are Reverse Mortgages Good For Seniors
Reverse mortgages have received a lot of press in recent years. Of course, there are pros and cons to using this option, and it may not be appropriate for everyone. Interestingly enough, two large organizations advocate their use, especially for seniors who need help funding their plans to age in place.
A study released by the National Council on Aging shows that 13.2 million Americans are candidates for reverse mortgages to pay for long-term care expenses at home, allowing many to remain independent and live in their homes longer. The Use Your Home to Stay at Home: Expanding the Use of Reverse Mortgages to Pay for Long-Term Care report funded by the Centers for Medicare and Medicaid Services and the Robert Wood Johnson Foundation concluded that reverse mortgages can alleviate financial pressure not only for individuals and families, but also for state Medicaid programs and the federal government.
Find An Hecm Counselor Or Lender
Reverse mortgages arent for everyone. However, the supplemental income generated from a reverse mortgage can help seniors live better and remain in their own homes longer. For more information, contact a reputable lender who can analyze your loved ones needs and goals to help devise a financial strategy that will help them pay for their care. Visit HUD.gov to access a Lender List Search tool to find an FHA-approved HECM lender and a Counseling Agency Search tool to find HECM counseling near you.
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