For many older adults, paying off a home mortgage or downsizing to a more affordable home is part of their pre-retirement plan. Purchasing a home in retirement comes with a variety of stressors and challenges that many people do not want to deal with. However, some people find themselves eager to relocate to a new home after they have retired. While the process can be more challenging for several reasons, the good news is that many people have achieved their post-retirement homeownership goals. What should you know as you gear up to make your next purchase?

Living on a Fixed Income
Lenders want to see that applicants have enough monthly income to cover their expenses and the new mortgage payment. However, in retirement, you may not have traditional income sources. The good news is that lenders do take into account Social Security income. Lenders also can account for retirement account drawdowns and asset depletion. For these options, you will need enough retirement or non-retirement assets to cover the full loan amount taking inflation and living expenses into account.

Establishing a Qualifying Debt Ratio
While many people strive to pay off debts prior to retiring, the reality is that some people are still paying down debt balances for years after they retire. These debts must be taken into account when you apply for a mortgage through the debt ratio calculation. Generally, your debt ratio should be 43 percent or lower, but there is some flexibility depending on the loan program you apply for. If your debt ratio is too high, consider spending time reducing your debts first. Another idea is to consolidate debts to establish a lower payment.

Coming Up with a Down Payment
There is a wide range of possibilities to consider as you try to round up a down payment. If you do not have established equity in your current home, you could apply for an FHA loan. FHA loans have a minimum down payment requirement of only 3.5 percent. You could also save up money from a part-time job or even buy a fixer-upper to get a house at a lower sales price.

If you intend to apply for a home loan in retirement, you need the guidance of an experienced loan officer. Our lending team at MortgageDepot is available to help, so contact us today for assistance with your purchase.

Contact one of our loan consultants to learn more.

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