A question I am often asked is, “How can I qualify for a loan when my only source of income is retirement income?”
It is a common misconception that retirees can’t qualify for a loan because they don’t have a job.
Here are 3 facts about qualifying in retirement:
1. If you have a stable income, such as social security, a pension, or a monthly check from your IRA; and this income will continue for 3 or more years, it is considered income.
2. If your income is not taxed, we can use it as a “net” check and figure out what the gross income equivalent would be. This way you wind up having more “income” than you thought you had.
3. Often, if you take your income from all regular sources that total is often the equivalent to a salaried person.
What if you don’t receive social security?
If you do not receive social security, we have a program called asset based lending.
Imagine you have a small pension but a large IRA that was your old 401k; and let’s say you haven’t needed to take any money out from that account. Most lenders would only use the small pension making it difficult to qualify.
However, asset based lending takes a certain percentage of the balance in your IRA account and divide it by a number of years, and that will be your qualifying income.
A Success Story
I recently helped a newly retired client buy a home.
He had no proof of his new income and was turned down by his bank and then his credit union before being referred to me.
Based on the definition of asset based lending, we took his 7-figure IRA x 60% and divided it by 15 years, and that was his qualifying income.
He was able to buy the condo he wanted, simplify his life, and have money to travel!
Another Option: Reverse Mortgage
Reverse Mortgage is another way for retirees to qualify for a purchase or refinance.
This loan has been around for a long time and is a powerful tool for those who are on limited income, but need or want a mortgage to own or stay in their current home.
Reverse mortgages allows you to convert part of the equity in your home into cash.
To qualify, you need to be over 62 and live in the home as your primary residence.
No credit or income qualifying is required. And the amount of the down payment and the loan is based on your age.
With a reverse mortgage, you can get the money you need, and you can you can still pay the monthly payment if you chose. You are also still responsible for the property taxes, insurance, and maintenance of your home.
More questions? Contact me today