How to Get Approved for a Mortgage as a Retiree Without Job Income

Knowing how to get approved for a mortgage as a retiree without joint income can feel like an impossible task.

However, you should know that it’s actually quite possible for retirees to still qualify for a mortgage

The Equal Credit Opportunity Act makes it illegal for lenders to discriminate against borrowers based on age.

So:

You can be sure that this should not be a factor when applying for a loan as an older retiree. 

Even though age-discrimination is not legal, banks still have an underwriting process to qualify borrowers for mortgages.

According to Jeff Tufford of Epic Mortgage, “There are many ways that retirees without a job can qualify for a home loan.” 

He goes on to say, “Working with an experienced, knowledgeable lender can help you identify sufficient sources of income as well as ideal loan products to get the job done.”

Mortgage Qualifications

In order to understand how you can get approved for a mortgage as a retiree without job income, it’s important to know about the criteria that banks use to qualify you for a mortgage loan. 

Now:

It is very likely that your mortgage loan is backed (guaranteed) by government-sponsored enterprise entities known as Freddie Mac or Fannie Mae.

They have minimum requirements in place for mortgage borrowers. In addition, individual banks may add their own requirements for borrowers as well. 

At the end of the day, all banks really care about is whether or not you can repay the loan.

If you meet these basic requirements for their mortgage product, then you should have no problem getting a loan to finance your home — even as a retiree without income.

Income

For starters, the bank will look at your income.

You don’t have to have income from a salaried position but it does have to consistently cover your monthly loan payments on time and as agreed.

Although the bank asks about your employment for the last two years, it’s not a deal-breaker if you don’t have a job.

Debt-to-income ratio

Once you are able to prove that you have enough income to service (pay) the mortgage note each month, you’ll also have to meet minimum requirements for the debt-to-income (DTI) ratio.

In other words:

If you’ve got too much outstanding debt in relation to your income, banks will question your ability to repay your loan.

This presents a risk they are most often unwilling to make. 

There are different debt-to-income ratio requirements based on your individual circumstances and the type of loan you are applying for but the standard DTI ratio is around 43% but many lenders like to see you below that threshold if it’s at all possible.

Credit score

Again, the minimum requirements will vary based on the loan type, amount and other circumstances but you can generally expect to get a home loan with a 620 or better credit score.

To mortgage lenders, your credit score is important regardless of whether or not you have income from a job.

How to Get Approved for a Mortgage as a Retiree

As a retiree, you’ve got special the special circumstance of not having an income tied to regular full-time employment.

In this case, you’ll have to show proof of other types of income.

The goal:

Show the bank that you can make the mortgage payment amount for years to come.

Asset depletion

One such way of qualifying retirees without a job is the asset depletion method.

This method -- ideal for asset-rich borrowers -- takes into account a certain amount of liquid assets you may have including stocks, bonds, cash and retirement accounts

Generally, these are the percentage of your assets that are used to determine income available for your monthly loan payment:

  • For assets in the form of securities like stocks, bonds, and mutual funds, 70% of the value of these assets will be used.
  • Retirement accounts will be considered as 100% available if you are at least 59½ years old.
  • Cash is also counted as 100%. 

Once the assets are weighted and calculated accordingly, they are divided by 360 months to get a qualifying monthly income amount.

This is the income that the bank will consider for the loan underwriting process if there isn’t income from a job.

For example if a 62-year-old borrower has $500,000 in stocks and bonds, plus another $500,000 in a retirement account, the bank would count $350,000 and the entire $500,000 to arrive at  $850,000 in qualifying assets. Then, $850,000 is divided by 360 months to get about $2,361 in monthly qualified income. 

Other Sources of Income

Even if you don’t have millions of dollars in the bank, there are other sources of income that lenders will consider if you are a retiree without job income.

Though you may not have a job like most borrowers, you might be surprised to know that the bank could approve your loan with the following types of income:

Fixed income

Fixed income includes monies from pension, social security, and disability benefits for traditional financing.

The bank would also consider a lump-sum retirement package as qualifying income as well. 

Be diligent:

In order to use these funds as qualifying income for a mortgage, this money has to be documented as income.

The lump-sum would require documents like a 1099-R from an employer while the social security and pension requires a proof-of-income letter.

Miscellaneous income

There are still other sources of qualified income the Fannie Mae website lists that can improve your approval chances for a home loan as a retiree:

  • Alimony or Child Support 
  • Automobile Allowance 
  • Boarder Income 
  • Capital Gains Income 
  • Disability Income — Long-Term 
  • Employment Offers or Contracts 
  • Employment-Related Assets as Qualifying Income
  • Foreign Income
  • Foster-Care Income 
  • Housing or Parsonage Income
  • Interest and Dividends Income
  • Mortgage Credit Certificates 
  • Mortgage Differential Payments Income 
  • Non-Occupant Borrower Income 
  • Notes Receivable Income 
  • Public Assistance Income 
  • Retirement, Government Annuity, and Pension Income 
  • Royalty Payment Income 
  • Schedule K-1 Income 
  • Social Security Income
  • Temporary Leave Income 
  • Tip Income
  • Trust Income
  • Unemployment Benefits Income
  • VA Benefits Income

Although a variety of income types could be considered as qualifying income, be sure to read the fine print when it comes how this income will be counted in the underwriting process.

In some cases, all of the income may be considered or just a portion of it.

Increase Your Chances of Mortgage Approval Without a Job

No matter what kind of income you’ll be using to qualify for a mortgage loan, you still want to look like a qualified borrower on paper in other aspects, too.

This includes:

  1. Maintaining a good credit score
  2. Maintaining a reasonable debt-to-income ratio 
  3. Having sufficient qualifying monthly income 
  4. Having a sizeable amount of assets that add to qualifying monthly income
  5. Keeping sufficient documentation that proves your income sources and asset base

Alternatives to Buy a Home as a Retiree

If, alas, you can’t be approved for a conventional mortgage loan without job income, you’ve still got options to purchase a home as a retiree without job income. 

Some options could include:

  • Borrowing money from family and friends 
  • Liquidating assets and using the money to purchase a property with cash
  • Use a reverse mortgage to buy a home 
  • Obtaining owner financing from the individual that owns the property 

Getting a mortgage as a retiree without a job isn’t impossible but it could require some creativity.

If you work with an experienced lender, they should be able to help you through the process of applying for a loan as a retiree without job income.

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