Applying for a mortgage as a retiree works much the same way as it does when you are employed. Lenders examine your home, your credit history and your capacity to repay the loan before making a decision on your application. The fact that you're no longer working should not hurt your chances of getting a loan as long as you have some other verifiable source of income.
When you apply to refinance a mortgage you must provide your lender with a copy of the warranty deed for your home. This document proves to the lender that you actually own the property. If you plan to buy a home, you must submit a signed purchase agreement. Your lender also will require with details of your homeowners insurance policy and property tax records since many lenders require you to set up an escrow account. If your home sits in a flood zone you also have to give your lender with a copy of your flood insurance policy. A payoff quote from your existing lender will be required if you are paying off another loan.
As a retiree, you must provide your lender with an award letter for the current year that details your annual retirement income. You should receive one of these letters from your former employer if you have a pension, along with award letters for Social Security and Supplemental Security Income benefits. You must also give the lender two months of bank statements that show these funds being electronically deposited into your account. If you receive retirement income in the form of a check, ask your bank for copies of these checks. Many lenders also ask for copies of your most recent 1099s from your income tax filings.
You can qualify for a loan on the basis of other types of income, such as rental income and income from investments, as long as you report this income on your taxes. The lender will ask for two years of tax returns and two years' worth of receipts or check copies for each type of income. You can get copies of statements from your broker or your bank to substantiate any interest, dividend or other investment income. Some lenders also allow you to use income from annuities and other types of insurance payouts.
You typically have to pay for closing costs such as lenders fees, title policies and state taxes whenever you take out a mortgage. You may have to provide your lender with bank statements to prove you have enough cash to cover these upfront costs. You also need to have cash on hand to cover a down payment if you are buying a home. Many lenders only allow you to use so-called seasoned funds that you have owned for several months. This rule is intended to prevent people from borrowing cash from friends or family members to cover mortgage-related costs.
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