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Author: madbrain Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75525  
Subject: Re: How much is enough? Date: 1/9/2011 6:09 PM
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Rayvt,

Thanks for that post, very informative !


They need to see documented income, and care little about your assets.

For most people, pension & SS is not going to be enough income to qualify. And they don't consider withdrawals from your investments as "income". The only thing they would consider as documented income was a regular monthly distribution from my IRA account, and they wanted to see 2-3 months of bank statements showing the deposit and a copy of the "confirmation of instruction" letter from my IRA custodian.
They wouldn't consider the stock dividends we receive as "income", even though we get $20,000 a year in dividends.


That's the sort of thing I would expect the lenders to ask for in this environment. At least you were able to get the loan. I have to wonder what would happen if you were living completely from your taxable investment accounts and savings prior to collecting SS, rather than IRA distributions. It sounds like you could not get the loan in that case, and could not tap your home equity.
That seems like another good reason to sock as much money as possible into IRA first rather than into taxable accounts or home equity. One can always take SEPP distributions for income when retiring at any age, and it seems that these distributions would satisfy the bank income documentation requirements, provided that it is enough income, of course. Thus if you had $20,000 year of dividends in your IRA and made $20,000 year of SEPP IRA withdrawals, the bank would count it as income. But not if those dividends were in taxable accounts. This is more proof that the lenders have gone mad.
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