hard for retirees to obtain a mortgage

[RWebb]

http://www.nytimes.com/2013/05/05/realestate/qualifying-for-a-loan-after-retirement.html?hp&_r=0&gwh=94152805B105B969D1443E6B58E16EEA

[aigel]

Guy has a $1 mil brokerage account and is taking out a $100k loan. I feel so sorry for him.

You should just pay cash and move on with life. You are old, enjoy while you can. Time is running out ...

G

[stevepaa]

Buy before you retire

[widgeon13]

Crazy, it just doesn't make any sense to me.

[aigel]

The guy just doesn't have the income. The $1 mil does not create enough income together with SS and odd jobs.

I really don't see the issue here - once you are retired, you need to look at spending money. Goal is to run out of life just before running out of money. The timing may be tough, but the last thing I will do when I am old is try to save more.

G

[wdfifteen]

Doesn't make sense to me either. I wonder why Aigel and Steve put the onus on the buyer and have no curiosity about lender's practices.

[widgeon13]

His payments on a 30 year fixed should be about $470 assuming 4% apr or $5640 per year. With a mil in a brokerage account returning even 3% and get $20K a year in SS as well as some misc income say 10K. He could be sitting on $60 a year and no drop in net worth.

Seems like a no brainer to me. He's a better bet than someone make 60K a year with the potential to get fired.

I'd also say the lending institution's practice is discriminatory.

[aigel]

You guys think the lender is worried he is passing soon and they get stuck with the mortgage and a 40% down payment?

G

[RANDY P]

1- it's just not in their guidelines. If your investor (the person who gives you the $$$) says they want active income, they get it. There are other lenders (private) that may buy that deal.

2- take out a damn reverse mortgage then. if the property qualifies, 40% down you're done.

3-Or show tax returns showing you are paying taxes on your retirement assets / what you draw. There's your income. If you pay no taxes, how can you say you have income?

rjp

[widgeon13]

Originally Posted by aigel

You guys think the lender is worried he is passing soon and they get stuck with the mortgage and a 40% down payment?

G

They would get their money from the estate.

[RANDY P]

age discrimination to declare that....

[RWebb]

If you pay no taxes, you may have tax-advantaged investment income - a Roth IRA would be one.

I'd say these lenders missed an opportunity b/c they are currently being ruled by fear, rather than greed (which was another part of the cycle).

[74-911]

I personally went through a very similar situation a couple of months ago. I made a significant down payment from the proceeds of the sale of our previous house and applied for a 6 figure mortgage for the balance on the new house rather than pull the funds from qualified accounts (IRAs).

To me it was a no-brainer. 2.5% on a 15 year note, deductible interest, my returns on the money in the qualified accounts are well above 2.5%, are accumulating tax free and most importantly, I have the cash available immediately if I need it, not tied up in a house. To withdraw from the qualified accounts would also cause a significant income tax hit. It doesn't always make sense to pay off your house just because you are retired or retiring - it depends on your individual situation and you need to put a sharp pencil to it.

I assumed that qualifying for the mortgage would be a piece of cake... credit score well above 800, large down payment, etc. etc and As the man in the article found out, mortgage companies want to see income these days, not assets. They want to see absolute proof of all sources of income. I lost count of the number of pages of financial documents I furnished them. When the loan officer first asked me what our income was I replied "it is whatever I need it to be" and not really being facetious about it. She kind of laughed and said more or less " that was then, this is now" and HUD has cracked down big time on mortgage lending.

This was the fourth mortgage plus several refinancings over the past 40 or so years and by far required the most documentation of income, assets, debts, etc. and there was absolutely no "we'll take your word for it" on any of it.

[Zeke]

Originally Posted by widgeon13

His payments on a 30 year fixed should be about $470 assuming 4% apr or $5640 per year. With a mil in a brokerage account returning even 3% and get $20K a year in SS as well as some misc income say 10K. He could be sitting on $60 a year and no drop in net worth.

Seems like a no brainer to me. He's a better bet than someone make 60K a year with the potential to get fired.

I'd also say the lending institution's practice is discriminatory.

The potential buyer said, “Having a job does not give you any more security than having the assets that I have.”

I think he'd agree with you.

[R K T]

Originally Posted by 74-911

I personally went through a very similar situation a couple of months ago. I made a significant down payment from the proceeds of the sale of our previous house and applied for a 6 figure mortgage for the balance on the new house rather than pull the funds from qualified accounts (IRAs).

To me it was a no-brainer. 2.5% on a 15 year note, deductible interest, my returns on the money in the qualified accounts are well above 2.5%, are accumulating tax free and most importantly, I have the cash available immediately if I need it, not tied up in a house. To withdraw from the qualified accounts would also cause a significant income tax hit. It doesn't always make sense to pay off your house just because you are retired or retiring - it depends on your individual situation and you need to put a sharp pencil to it.

I assumed that qualifying for the mortgage would be a piece of cake... credit score well above 800, large down payment, etc. etc and As the man in the article found out, mortgage companies want to see income these days, not assets. They want to see absolute proof of all sources of income. I lost count of the number of pages of financial documents I furnished them. When the loan officer first asked me what our income was I replied "it is whatever I need it to be" and not really being facetious about it. She kind of laughed and said more or less " that was then, this is now" and HUD has cracked down big time on mortgage lending.

This was the fourth mortgage plus several refinancings over the past 40 or so years and by far required the most documentation of income, assets, debts, etc. and there was absolutely no "we'll take your word for it" on any of it.

Holy cow.....word for word exactly what I'm doing right now!
Sold our house and spending two months in a furnished apartment before we can move into the new house. Three more weeks and I can't wait! There were so many hoops to jump through this time I seriously considered pulling money out of the market to just pay cash, but we are making close to 15% and that would be seriously stupid to not take advantage of a 2.7% loan.

Last time we did a mortgage it was basically the "quick and easy" meaning sign here and here is your loan.

[RANDY P]

Thanks to potential "discrimination" charges, it's hard to get a lender to step outside the guidelines. What is provable for one is not provable for the other.

Imagine if you had to give a loan to a known mob member, like Tony Soprano. He has all the assets, but no income. You know full well what he's accused of and any day they'll nail him and he'll be in jail- just hasn't happened YET.

On the other side of your desk you have Ma and Pa Kettle. never spent a dime in their lives, also have huge assets, but no income.

Who do you approve, and disapprove?

Banks follow cookie-cutter guidelines to prevent "discrimination" charges.

rjp

[RANDY P]

PS banks just aren't into lending on houses at the moment. Rates too low, and values too risky. They're gonna only lend to the best.

rjp

[74-911]

Originally Posted by R K T

Holy cow.....word for word exactly what I'm doing right now!
Sold our house and spending two months in a furnished apartment before we can move into the new house. Three more weeks and I can't wait! There were so many hoops to jump through this time I seriously considered pulling money out of the market to just pay cash, but we are making close to 15% and that would be seriously stupid to not take advantage of a 2.7% loan.

Last time we did a mortgage it was basically the "quick and easy" meaning sign here and here is your loan.

R K T:
You are also describing exactly what we went through. A couple of times I almost said screw it, we'll just pay cash but as you state, it would be seriously stupid to not take advantage of these once in a lifetime interest rates. I assume you also remember when mortgage rates were pushing 20% ?

Good luck with your mortgage and enjoy your new house.... we moved in the first of Nov. and I told wife when I leave this house it will be feet first.

[R K T]

Ha....again same thing! I said the last move would be the last. We are downsizing big time and I'm going to have to adjust a lot to squeeze all my important 3 car garage stuff into a 2 car garage. I see a lift in my future......

[Por_sha911]

Goal is to run out of life just before running out of money.

Some folks may care about someone other than themselves and want to leave inheritance for the heirs if possible.