From time to time I get asked questions about how a retired person would go about selling and buying a different home either in the same area or in a different state (For example if they want to move out of California and to Colorado).
Obviously, as a fully retired person, one would not have a regular job with income per se, and not everyone is able to sell a home and buy something else outright without payments (and perhaps you wouldn’t want to anyway, what with interest rates being so low currently.)
How Do Lenders Handle Retirement Income?
Most lenders will use retirement income, such as a pension and/or monthly Social Security income in order to qualify an individual for a home mortgage. These forms of income are treated the same as regular salary and wages – you also have to document it the same.
Lenders will want to check your credit, see statements, tax returns, and ay award letters from your pension department or Social Security. In short, just like if you had a regular job you have to be able to prove your income.
That being said, since lenders are a lot stricter than they used to be (which is really a good thing overall), things like debt-to-income ratios have tightened up so much that it could be difficult to buy a new home without selling your old one first. If you already own an existing home free and clear, then you are ahead of the game but need to make a decision. You could possibly buy a new one and then sell the old one later.
I Would Recommend You Sell Your Previous Home First!
Just keep in mind that you then have to pay property taxes and maintenance costs on both properties, and it can be stressful to worry about selling the old one. Or you could sell the old one first, the advantage is that then you know exactly how much money you have and can rest more assured that you are buying within your means. The disadvantage is that your buyer will probably want to move in, which puts pressure on you to find a new property quickly, however it might be possible to negotiate a rent-back provision in which you stay in the home you sold and pay rent to the new owner until you find a new home.
Give us a call and we can go over your options and we would also be happy to provide you with a few trusted lenders’ names and numbers. The lenders we trust will not hound you, they will work at your pace, but more importantly will be able to work with your exact situation and clearly explain your choices to you based on your own individual situation.
Can You Buy After A Short Sale? Yes! Maybe…
I actually had a client a few months ago that sold their existing home in a short sale situation, however within 6 months they were able to purchase another home. Impossible? I thought so too, but one of my lenders made it happen! Boy, was that a happy closing indeed! More importantly, it illustrates that not every lender is the same. Not everyone fits into the same “box” and different lenders offer different products for different situations.
Another possibility may be to take out a mortgage (or a refinance) on your existing home in order to get enough cash to provide funds to get into another one, then after the first one sells, paying the loan back from the proceeds. The moral of the story is that there are options out there. Give me a call and I will be happy to discuss them with you and put you in touch with some professionals that do this every day that I know and trust in order to make this next stage of your life exactly what you want it to be!