Even with a seemingly strong credit background and a high level of assets, a retiree seeking a new home loan can have major difficulties qualifying, writes a New York Times article published this week.
The Times profiles a 75-year-old borrower, Sanford Evans, with a credit score above 800 and more than a million dollars in brokerage accounts who was unable to qualify for a new mortgage due to lack of recorded income. He was able to meet a 40% down payment for the desired new home purchase.
“Mr. Evans, who was moving from a condo in Boston, endured delays that dragged on for months. The problem, he was told, was his income,” the Times reports. “He received Social Security and monthly dividend distributions, and supplemented these earnings with part-time medical writing for a Boston hospital. Yet he still came up short. The lender wouldn’t count the writing income because he was moving away from Boston.”
The problem was not unique to the lender in the situation, according to the report. An inability to prove income beyond social security payments in retirement is a tough hurdle for those seeking new loans from many lenders.
“Most lenders, though, measure income the same way, said Richard Pisnoy, a principal of the Silver Fin Capital Group, a brokerage in Great Neck,” writes the New York Times. “When they look at dividends, they want to see a regular annual amount on the tax return paid out over at least the last two years. As far as part-time work, when the borrower applies, ‘they need to be able to confirm you’re actually employed at that moment,’ he said. They will then credit income shown, but may require a two-year work history. Social Security income is always counted. Borrowers should be aware that Fannie Mae guidelines allow lenders to increase that income by 25 percent if the beneficiary isn’t paying taxes on it, Mr. Pisnoy said.”
One way around the problem can be the use of asset depletion, which ultimately worked in favor of qualifying Evans for the loan he desired, but he had been so frustrated by the process, he ended up seeking the loan at a different bank which interpreted his income differently.
Written by Elizabeth Ecker