Written by Jeremy Biberdorf
If you are nearing your retirement, and want to re-locate, you may be wondering how you can manage the move financially. You may assume that because you do not have a regular paycheck coming in, you will not be able to get a mortgage to help you purchase a property.
However, it is possible to get a mortgage even after you have retired. You can check the best calculator to estimate your mortgage payment in Texas. However, it’s important that you pay attention to certain factors that are relevant to a mortgage after retirement. These factors help to determine whether or not you can obtain a mortgage. It’s certainly worth taking a look at these factors as although it may be harder to borrow money after retirement, it’s definitely not impossible.
Using the drawdown from retirement method to calculate income
Calculating available income is an important aspect of determining a mortgage application. One of the most common means of determining income for retirees is the drawdown from retirement method. In the case of anyone who is at least 59 ½, it’s possible to use withdrawals from a retirement account as a means of determining income. Withdrawals for at least the last two months are taken into account.
Using the asset depletion method to calculate income
Another method that is used to determine income, when a retired person applies for a mortgage, is asset depletion. This involves the calculation of a person’s financial assets after which the cost of down payment and closing costs are subtracted. 70% of the resulting figure is then divided by 360, to determine a monthly figure.
Why does the debt to income ratio matter?
It’s not just income that is important in determining whether a retiree can acquire a mortgage. The debt to income ratio means that no more than 43% of a person’s income can go towards servicing a debt. It’s important to be aware that this includes any debt for which a person co-signs, such as the mortgage of an adult child.
What other factors may be important?
There are other factors that are also taken into account, when making a decision on a mortgage application from someone who is retired. The housing expense ratio means that payments made for a mortgage, mortgage interest, taxes and insurance cannot be more than 36% of available income.
Even if this ratio, and other factors, are satisfied a poor credit score can still make it difficult for a mortgage to be awarded. Ideally, a credit score of 780 should be attained, in order to stand the best chance of success.
You can see that it’s not easy to acquire a mortgage, if you are looking to move home after retirement. However, it is possible to succeed with a mortgage application, depending on the situation with your income, expenditure and credit rating. Not having a regular paycheck does not necessarily mean you will not be successful, you may still be able to get help.