Myrtle Beach Area Retirement and Real Estate

Obtaining A Mortgage To Purchase Real Estate Shortly After Your Retirement Party Could Be A Problem


You may have plenty of money sitting in the bank or invenstments when you retire but if you do not want to use it to purchase a new home or condo you are probably thinking you will find the perfect home and apply for a mortgage.  It would never cross your mind that a lender would turn you down when you apply for a mortage to buy a home or condo and that sometimes that turndown can be done by the mortgage underwriter on the day of closing.  Well it can happen, and does, to people who have excellent credit and payment history.  

According to Dave Bronco of Investors Mortgage in Myrtle Beach, the retirees income distributions from whatever source must be set, consistent and due to the retiree for a minimum of three years after the closing / settlement date of the mortgage.   Lenders currently will not count any distributions from a Self-Directed IRA because they consider them like a savings account that the retiree could take the money out and spend it at their discretion.

Lenders can count non-taxable income such as Social Security at 125% ($1,000 would count as $1,250 income) in the formula of Income-to-Debt Ratio.  The Income-to-Debt Ratio is normally 45% but can be set as high as 50% depending on the applicant for a mortgage. 

Those who retire before their retirement income is set to begin distribution will probably not qualify for a mortgage. 

If you think you want to have a mortgage on the home you plan to purchase for your retirement and you will not have a set consistent distribution of retirement income at that time, you may want to purchase your new home before your retire.  If you can qualify for the purchase of a "second home" and close on that purchase prior to your retirement announcement  (lenders are now varifying employment up to the day of closing).  You can then retire and make your new home your primary residence.  People purchase a second home for future retirement everyday and it is not wrong to do so if you can afford the additional cost.  Terms and interest rates are the same for a primary or second.  Also talk to your tax advisor because you will be able to claim the mortgage interest and property taxes expenditures on your Income Tax Returns (IRS allows expenditures for up to three homes) and there will be some expenses you pay at closing that are also deductable.