The Motley Fool Discussion Boards

Previous Page

Personal Finances / Buying or Selling a Home

URL:  https://boards.fool.com/how-much-trouble-did-you-have-getting-the-34267076.aspx

Subject:  Re: Mortgage Date:  8/6/2019  1:42 PM
Author:  aj485 Number:  129234 of 129289

How much trouble did you have getting the mortgage given that you are retired and have no income? We may be on the market for a piece of rental property, and as I am retired but we have enough assets to pay cash for the house, I'm wondering how hard it would be to get a mortgage. I'd love some details on that part of your experience.

Not inparadise, but going through this right now - buying my first rental property without counting any income from work. While I was working, it was easy to purchase rental properties. It's a little more complex when you're not working - but it's still doable.

First of all - be sure that your application states that this will be used as a rental property, not as your principal residence. You will likely have to pay a higher rate, but it's mortgage fraud to declare that a property will be your principal residence when it's actually going to be a rental property. And if you don't have income from work, and don't state that it will be a rental property, you won't be able to use the potential rental income to help you qualify.

You can generally use 75% of the expected monthly income from the rental property as income to qualify. It helps if it's already a rental property and has documented income, otherwise, you'll have to use the appraiser's estimate of the rental income. (BTW - you generally have to pay more for the appraisal on a rental property, since the appraiser needs to appraise 2 things: the value of the property and the income for using the property as a rental.)

If the allowable rental income isn't enough income to qualify you for the mortgage, you have to have other documented income. If you have documented dividend/interest income from taxable accounts on your last 2 tax returns, that can be used. If you have income from other rental properties documented on your last 2 tax returns, that will help, too. If your last two tax returns show any self-employment income that will continue, that will also help.

If you don't have enough documented income from other sources, you will probably be required to set up a withdrawal from your retirement account. The administrator of your retirement account will have to document that you have set up to have a regular withdrawal of $X per month from your account. You will have to show at least one deposit into your checking account (possibly 2 or 3, depending on your lender's requirements) from that arrangement. (Note: if your lender requires more than one deposit into your checking account, and you only want to have to show one*, ask your lender if you can set it up as a quarterly withdrawal.

*You might not have to wait for more than one withdrawal to hit your account, or you might want to roll that withdrawal back into your retirement, if it's been less than 60 days. If you are going to roll the withdrawal back in, you can only do that with one withdrawal, and only as long as you haven't done another non-trustee-to-trustee rollover into that individual's accounts within the last 12 months. Please keep in mind, after you close on the loan, there won't be any "IRA police" checking to see if you are continuing to take withdrawals. If you want to cancel it immediately after you close, be sure that the administrator on the account will allow you to do so.

AJ
Copyright 1996-2019 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us