Money Talks News’ recent article entitled “6 Things You Should Know About Buying a Home in Retirement” explains that older home shoppers typically like smaller, single-story homes. They look for features to help them age in place — like wide halls and doorways, no stairs and a no-curb entry. Qualifying for a mortgage may be a new challenge for buyers who no longer have a regular paycheck. Here are six things you should know about buying a home in retirement.
- A mortgage is not necessarily bad. Having a mortgage-free home is a great goal, and it typically allows retirees more latitude financially. However, the question of whether to have a mortgage is part of your broader financial plan in retirement. The answer depends on your own situation.
- There is more than the weather. Do not make climate your only or main factor when looking to relocate in retirement. Your finances also play a big part in whether and how you enjoy retirement years. Before settling on a new location, learn what the recurring costs will be in a new area, including housing, income tax, property tax, the cost and availability of medical care and the quality of public transportation.
- Plan to “age in place.” When retiring, consider if this could be your last home. If so, make your home choice with an eye to growing old. No matter your current health and mobility, find a home that will serve you in your later years. That usually means a single-level home with no stairs to manage, in case walking becomes difficult for you. You should also look at places with accessibility features: wider hallways and doorways, lower counters (to accommodate a wheelchair), bathroom grab bars and no-curb entries and doorways.
- Consider a reverse mortgage to buy a home. A reverse mortgage is a home loan that lets qualified homeowners age 62 and older borrow funds using their homes as collateral. However, you also can use a reverse mortgage to buy a home. Seniors who meet the requirements are using government-insured HECM (Home Equity Conversion Mortgage) reverse mortgages to help with making a home purchase.
- Qualifying for a loan can be more difficult. Lenders cannot discriminate based on age, but the lending standards typically look at a borrower’s monthly salary or W-2 wages. If you cannot demonstrate sufficient monthly income — despite having plenty of savings or investments — qualifying can be tough for a retiree. Work with a loan officer and lender with expertise in helping retirees buy a home.
- You might need to consider other ways to qualify for a loan. If your monthly taxable income — including pension checks, Social Security, dividends and interest — does not allow you qualify for a mortgage, there are alternative approaches, including qualifying using 401(k) or IRA withdrawals or qualifying with assets.