Buy Your Retirement Home Before You Retire

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Are you thinking about retiring from your job and relocating to a new area? If so, will you be financing the purchase of your new home? You better have a well thought out plan in place before you leave your job!

Often new retirees quit their job and search for a retirement home AFTER they have surrendered their income only to find out they cannot qualify for a new mortgage.  Unfortunately, lenders still need to “run the numbers” and adhere to the income to debt ratios in order to approve home loans. Because income levels usually drop significantly from a working paycheck to social security benefits, there is a very good chance that without a “lion’s share” down payment or other “mega” guaranteed source of income, you could be rejected for your golden years’ retirement home.

Recently, we encountered this problem. A newly retired New Yorker wanted to move to Florida to spend the rest of his life. Unfortunately, not realizing how expensive the Florida market had become, he needed to finance a lot more than he anticipated. Because he did not want to use most of his savings on a down payment, he was “stuck” because he could not qualify based on his only income, his Social Security check.

Had the New Yorker researched the whole environment prior to abandoning his job, this problem could have been easily avoided. The solution would have been to purchase his future retirement home while he was working, while he still had large documented income. The home purchase could have been classified as a 2nd home or investment property and he would have qualified under one of these classifications.

The bottom line is, BEFORE you even think about retiring and sacrificing your income, perform as much research as possible regarding all facets of purchasing a retirement home. Beware, once you relinquish your high income, you may also unwillingly relinquish your financing options and thus your retirement home.