For retired seniors, the process of buying a new home can seem overwhelming, even if they’ve done it once or twice before. The priorities change in lenders’ eyes, and retirees may find themselves having more difficulty getting approved because their income isn’t high enough for them.
They often face challenges when trying to buy a home again after years away from the market, but there are solutions!
To help, here are some tips on how you can help retirees find their dream home, land a great mortgage, and still have plenty left in the bank for whatever surprises life delivers.
Tip #1: Find the right real estate professional.
When seniors move to a new place, it is always important that they find the right real estate professional in their new home state, and that they are available by phone seven days a week.
Tip #2: Watch the debt-to-income ratio.
Seniors must stay on top of their debt-to-income ratio (DTI). If they are on top of their debt-to-income ratio, they will look a lot more financially stable to lenders.
To determine the DTI ratio, they simply take their total debt figure and divide it by your income. Their Ideal ratio should be 45% or lower.
Tip #3: Reconsider risk calculations.
Some retirees are used to taking risks and thinking long term, especially when it comes to investments. But they also need to consider adjusting just how much risk they are willing to take when it comes to buying a new home. Is having a monthly mortgage payment in retirement years a risk? Is a 20% down payment from retirement funds a risk?
Tip #4: Crunch the numbers.
We all know seniors who are living into their 90s today, so it’s no surprise that many retirees gravitate towards the tried-and-true 30-year mortgage. But before settling on a standard loan term, seniors must weigh both costs and benefits of each different kind of mortgage.
And although lenders are willing to give retirees a large loan, it doesn’t mean they should take it. So, while it may be tempting for retirees to buy a bigger, more lavish house, advise them to really look at their extra costs, future healthcare costs, aging in place and affording the monthly payment in the event of loss of spouse…..
Tip #5: Get creative with mortgages.
For seniors, landing a fantastic mortgage, like a 30-year mortgage with a low interest rate, isn’t so easy when you leave the job market and no longer have a steady income. Instead, retired seniors should find a professional who is fluent in many types of mortgages.
In fact, a popular option for seniors is a Reverse Mortgage (HECM) for Purchase, which can actually be a useful tool for retirees. While reverse mortgages can be complex, they will know if it’s right for them when they understand how they work.
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If you or some of the clients you serve haven’t thought of this option, we want to help you give them all the information needed to understand the benefits of reverse mortgages.
If you have any questions about this subject, we’re happy to help. Don’t hesitate to contact us to learn more!