Many retired individuals need mortgages for buying homes. Lenders treat retired homebuyers in the same way as they consider other categories of mortgage applicants. It is crucial that you have a sufficient post retirement income in order to secure a mortgage. Here are some aspects about acquiring a mortgage after retirement.
There is a significant demand for homes among retired individuals and couples. Older individuals may wish to move to smaller homes suitable for them. Some retired persons may need to institute home improvement projects like converting a staircase into a ramp in their existing homes. They may require second mortgages for the purpose.
Income Requirements for the Mortgage
Government laws do not bar homeowners above the age of retirement from taking out mortgages. Lenders take into account the ability of a borrower to repay the mortgage. The requirement of verification of income of a retired person can be more stringent than usual. A retired person’s income typically consists of Social Security benefits, annuity payments and individual retirement accounts.
Lenders favor retired individuals with a work income. In addition, the length of retirement incomes is an important factor for lenders granting a mortgage. It is vital that the incomes listed on the mortgage application continue for at least three years.
You will need to provide copies of the Social Security letter awarded to you and other documents related to retirement incomes. If you are working, you need to produce pay stubs for a couple of months and income tax returns for the previous year. In addition, you must present bank account statements and documents related to other savings schemes. The underwriting process will verify all the incomes and bank statements listed in the mortgage application.
Credit History Requirements
A clean credit report is important for securing a mortgage. The debt to income ratio must not exceed 45%. Lenders may ask to see your utility bills and the payment receipts for them.
Down Payment Amount
A substantial down payment toward the cost of the home may avail of a mortgage with comfortable repayment amounts every month. However, a prudent retiree keeps aside sufficient cash reserves for medical requirements.
A mortgage term of 15 years will allow you to develop equity in your home swiftly and reduce the total interest cost on the loan. However, the practical difficulty of high monthly payments may make the choice of a 30-year term more realistic.