Wanted to ask a question for anyone who may know this answer please.

Being at a crossroad in my (our) life, my wife and I are discussing the possibility of me retiring from full time work and both of us filing for SS. I am 64 and she is 62 and the numbers would work. Not that I want to retire but finding full time work in my area with healthcare benefits has not worked out thus far (still looking every day).

If we were to retire we can get healthcare at a reasonable rate so that is not an issue. We are debt free and would like to buy another smaller home and then sell our current home with plans on paying off the new home mortgage once we sell our current home. The plan would be to downsize in square footage which will allow our new home to cost less than our current home's value.

QUESTION - If we retire can we use our retirement income (SS for both of us and if necessary, our IRA's) as income to apply for a conventional home mortgage or is there a better way to accomplish this process? Our thought is if we go this way it will allow us time to find what we want, buy it, start moving items from our current home (to declutter for showing), then list our current home for sale.

We currently have an available Line of Credit on our current house that is $50k but that is not enough for our needs. I checked on a $300k short term "bridge loan" (like a new home construction loan rather than a full 15 or 30 year mortgage loan) at our local bank last week and they said if I had a job (which I don't) they could loan us the money to purchase a new home, but the rate was 10.5% (would only have to pay the interest monthly) so that is why I am wondering if SS retirement is viewed to be an acceptable "income" to get a conventional home mortgage loan.

Thanks for any advice or guidance.

I'm not a home loan pro, but I do think that if you're actually receiving SS checks, those would count as income. However, I don't think just being eligible for Social Security would be accepted as proof of income.

That said....why not sell the current home first? Then you'd know for sure what funds you have available to buy the new place, and not need to bother with a new mortgage.

Based on a quick reply from my wife who is a mortgage processor, you should reach out to a loan officer in your state for a specific reply.

SS income is applied as income for applying for a loan, but only at the amount of the income. You can run into issues if the time between buying and selling is too long. You may qualify for a primary residence, but not to have a secondary residence. There are different Federal (FHA, RDA) and State loan programs that could help you, but each have their own requirements (income/assets).

Your best case IHO would be to sell your current home with a contingency of accepted offer of your new home (or to that effect). Again, each state has slightly different rules on that, and best to talk to a mortgage broker in your state for clarity.

quote:

Originally posted by joel9507:
That said....why not sell the current home first?

Better yet, try for a concurrent closing, where you sell your old house and then buy your new one on the same day. Then you don't have to worry about making short term living arrangements in the interim, and it removes the issue of having to qualify for a mortgage.

That's what I did in 2020. Closed on the sale of my house and then rolled immediately into closing on the purchase of my new house. It's not always possible, depending on the time frame of the buyer of your old house and the seller of your new house, and some sellers don't want to hassle with contingencies. But it's something to try for, with the help of your realtor.

Not exactly what you asked but I'm going to outline how we would do it.
Get the current home sold first. Plan to buy New home contingent on the sale of your home. This is option one. Option two is to sell current home and go into a rental while you find the forever home.

Your plan as laid out exposes you to significant risk. It's how you end up with two mortgages potentially. In the current economic and real estate environment I would not willingly be on the hook for two mortgages for any period of time. But we are weirdos who lived in a poorly converted pole barn while we had a house built. Had a dog a lots of stuff to store. REALLY didn't want the risk of two mortgages.

quote:

Originally posted by Powers77:
our plan as laid out exposes you to significant risk. It's how you end up with two mortgages potentially.

By the OP's statement of "we are debt free", I take it that their current home is paid off. If that's accurate, then there's no worry about being stuck with two mortgages.

Not a mortgage person. My wife's a Realtor so this is more about that.

Right now in many places, the real estate market is in the tank big time.
It's down a lot more than the published numbers, just like inflation on consumer goods is up much more than the published numbers.

First be sure you can sell your home for what you are figuring. Have your agent show you closed/selling prices, not the asking prices.
Then, put it out there on the market while looking around for what you want. You don't have to accept an offer for less than your asking price (if you find a buyer first) so you have some control if you don't want to move before finding another home.
Although the number of listings in your new homes price range are low now, you can probably find something and have good negotiating power if you have a cash closing upon the sale of your old home.

An unrelated question, how are you going to get lower medical insurance if you quit the jobs that provide it, before you're 65?

Guys - Thanks for your replies and recommendations. Yes our current home is paid for but having a new mortgage for an extended period of time while we sell our current home WOULD eat into our plan, and that could happen in today’s market.

Right now I have to agree with the recommendations already posted here. Why risk what we have worked so hard to accomplish by something that is out of our control (how long it will take to sell and close on our current home).

One thought that I think we may consider, because we were the general contractor on our last two home builds, would be to find a nice property and pay for it. Get that property set up and prepared to build a “shop” that can be temporarily set up to be livable, then when we get a contract on our current home, complete the shop and move into it while we build our final home. My current shop has a full bathroom and it heated and cooled (as needed) so my plan is to have another shop at our final home.

Thanks again to each of you for your help in this situation. Again we have not committed to anything and maybe our best bet is to pause for another 6-12 months and see what happens with the market and rates. I really do not want to give a lender a single cent of my money but I can flex on that statement if it makes our transition a little easier. In our (my wife and my) perfect world we said it would be great to find and buy a house, set it upon a 30 year mortgage, start moving in, sell our home in the next 60-90 days, then pay off the new home mortgage and it would be like we were renting our new home from the mortgage lender. I know, sounds great but there is a good chance that it will not work out this way. Greatly appreciate all of your responses. Now to rethink our current and future position on this topic. Mark

What we did, was get a solid buy/sell on our existing home and then go shopping. We knew what our cash position would be after the closing so we knew what our price point was. We closed our our home one day and purchased our new home the next. Worked like a charm.
Mike

quote:

Originally posted by 220-9er:

An unrelated question, how are you going to get lower medical insurance if you quit the jobs that provide it, before you're 65?

We have spoken to a representative at HeathCare.gov and having been told that if our combined income is less than $79k a year, we can purchase insurance through the gov’t at a significantly reduced rate. Because we are debt free, our combined SS income and our planned IRA withdrawals would fall below this number. If I am missing anything related to this representative’s summary please do not hesitate to advise. She said our Medicaid insurance would be through Aetna since they have the largest in network providers in our area.

If you ask me, you’d be insane to buy a house with the current interest rates and inflated prices, even for a short time.



Can you wait until this housing market house of cards collapses? Could you sell current house then just rent a place for 1-2 years?

I’m also reading about rumors of the Fed cutting interest rates again soon because they of course are getting panicked about high rates hurting the Democrats in November (note I didn’t say Biden, because I don’t think he’s going to be running)

quote:

One thought that I think we may consider, because we were the general contractor on our last two home builds, would be to find a nice property and pay for it. Get that property set up and prepared to build a “shop” that can be temporarily set up to be livable, then when we get a contract on our current home, complete the shop and move into it while we build our final home. My current shop has a full bathroom and it heated and cooled (as needed) so my plan is to have another shop at our final home.

Not a bad idea, friend of mine did something similar, he built a large barn for his shop, lawn stuff etc with an apartment overhead, didn't get the apartment done in time so he bought a used trailer to live out of, so for 6 to 8 months they lived out of it on the property while the house was finished, then sold the trailer.

quote:

Originally posted by PASig:
If you ask me, you’d be insane to buy a house with the current interest rates and inflated prices, even for a short time.

High mortgage interest rates have helped to reduce house prices. Fewer buyers = lower demand = lower prices.

So this is actually a good time to be buying a house with cash.

Once the interest rates drop, the number of potential buyers goes up. More buyers = higher demand = higher prices. (That's how we got into this housing cost spike: super low mortgage interest rates.)

sigarms, we are in a similar situation, retired and selling our home and wanting to buy a down-sized home for cash. I am on SS and my wife is still too young.

Real estate is local for sure, so I would talk to a local agent that you can trust to get an idea of what they predict the market will be doing. The last thing you want is to buy a place at the top of the market and then still own the first home as it declines in value and no buyers are even looking. This happened to my uncle and it was a lot of financial stress for a couple of years. While you could turn your first home into a rental property to make ends meet, it is a less than fun situation.

Have you discussed selling your home now and renting if there isn't a great home to buy? The cost of renting is not much different than the cost of owning.

I am currently not liking that for us because I don't want the upheaval of two moves. We have a couple of decent possible homes to buy right now, so if they stay available when this house sells we are ok. If nothing is out there, it may come down to renting.

Imho, owning 2 homes at the same time and being stretched financially is no way to live.

I was in a similar position several years ago. While I was in talking with my Schwab advisor, he mentioned that I could borrow against my assets held at Schwab.

I didn't get into any specifics on the details but the rate was similar to (then) current mortgage rates.

If you can use SS income to qualify for a purchase mortgage I don't see any issues. You will pay a bit more interest as the new home will not be considered a primary residence. But if you can sell within a few months it won't cost that much more (assuming you pay off the new house with the proceeds).

I bought a second house last year. I have 2 mortgages. I plan to pay off the new house in 2.5 years when I retire.

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We have spoken to a representative at HeathCare.gov and having been told that if our combined income is less than $79k a year, we can purchase insurance through the gov’t at a significantly reduced rate. Because we are debt free, our combined SS income and our planned IRA withdrawals would fall below this number. If I am missing anything related to this representative’s summary please do not hesitate to advise. She said our Medicaid insurance would be through Aetna since they have the largest in network providers in our area.[/QUOTE]

The Medicaid situation could be complex and varies by state so I'd want to talk to someone that has hard numbers for your situation.
Since your still well below full retirement age you'll have more taxable income and that changes the subsidy the government gives for lower income folks. That can bite you bad at the end of the year, both taxes and penalties possible.