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Can You Buy a House on Social Security?

Older couple working on Laptop from HomeUpon entering retirement many believe that their days of buying real estate may be over. This simply is not the case. Most people reaching retirement age have owned a home at some point and may have a home they wish to sell but that doesn’t mean they don’t want to move into something that is valued for more then what they sell. In fact those who depend on social security income can qualify for a loan on a new home as long as their debt to income ratio works for the amount they plan to borrow. You will also find that you can still get a 30 year mortgage well into your retirement years. Getting a mortgage in retirement is more common then you think.

It can feel overwhelming to start a new mortgage term during your retirement years however if a small loan helps you move into the home you’ve been dreaming of, the loan shouldn’t be a concern at all. There are a few things you will want to consider when entering into a mortgage after retirement.

1. Lifestyle – Retirement is a time of major consideration when buying a home. You don’t want to rush into anything before you know what lifestyle you will prefer during retirement. For example, if you love to travel you will want to make sure the mortgage you get allows for enough money left over for travel.

2. Tax Burden – If you are downsizing your home after retirement you may find that your tax burden is lightened but sometimes even if the space is smaller the taxes can be just as high or higher. This is often true in a condo situation where there are management fees on top of the taxes. It is important to prepare for these taxes and plan for them but it’s also important to take into consideration if you may qualify for some reductions in the tax burden. Many places will offer tax discounts for seniors that have been living in their home for a set period of time.

3. Timing of Retirement – If you are nearing retirement age but getting ready to make the transition, you may want to consider securing the loan before you enter into retirement. If you want to refinance or get a mortgage for a higher amount it may make sense to do it before you have officially retired. While you can absolutely get a loan after retirement, the amount you can qualify may be less depending on your retirement income.

4. Investments – If your retirement depends on a combination of social security income and income from retirement account investments it’s important to understand the potential variation in that income. Your investments such as IRA’s will have a minimum annual withdrawal required. Or if you live of the interested earned monthly on your investment this can change as the market changes over time. Counting on the exact amount from your investment every month may not be an accurate plan.

Entering into your retirement years is a very exciting time that comes with great change. Don’t make assumptions that you will be limited when it comes to real estate opportunities when you reach 65. Speak with your loan officer and your financial planner to help you make a wise real estate decision that will serve you well for years to come.