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Old 06-19-2021, 06:43 AM   #21
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Originally Posted by lauradrops View Post
We had the same issue in 2012. We were too young to touch TIRAs, and being newly retired had no way to show enough income. We wound up setting up 2 $500 72Ts to show an income stream. We made them just enough to qualify for the mortgage and then cancelled one right after closing, can't really remember why it was recommended (required?) we keep one.
So did you need to pay the 10% early-distribution penalty on all the 72(t) distributions after cancelling?

My understanding is that if you execute a 72(t) plan you need to run in it for a minimum of 5 years -- maybe more if you are more than 5 years out from age 59 1/2 at the time you start it -- in order to not "default" on a 72(t) plan.
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Old 06-19-2021, 06:49 AM   #22
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^^^ Yes, there seems to be a sizeable gap between what the documents seem to suggest is required (based on a % assets with a healthy haircut as I recall) and practice of requiring some "income".

While it is a bit of a joke that you can stop the transfers after the loan is funded, likewise you could always lose you job or quit right after funding. In fact, when I did my last refinance I had already resigned but was still on payroll so the employment verification just prior to funding the loan went smoothly.
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Old 06-19-2021, 08:00 AM   #23
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Our lender ONLY went by the income shown on our 1040. Could have cared less what "actually" happened to the money. If the FEDs said it was "income" that was good enough for the lender. YMMV as always.
The problem arises when you don't have the 1040 history of such transactions and you have to start a monthly withdrawal from a TIRA of an amount sufficient to satisfy the lender. It was only for a couple of months for us.
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Old 06-19-2021, 10:01 AM   #24
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https://guide.freddiemac.com/app/guide/section/5307.1 Most the banks/CU I talked to use these rules and depending on age/ where invested, it may disqualify a lot of your assets since the rule is if there is a penalty for withdrawal which it didn't seem to matter there isn't since I had enough Roth conversions, all they cared was I wasn't 59.5.

Angle Oaks is a big private lender that does them based on their own rules but expect to pay up 2% which there is some leniency if you do a bigger down payment improving LTV. I hope there are better ones out there but thats the only one I had experience with and everyone I knew bit the bullet and went there too. They were willing to lend me more than even I was comfortable taking out.

Pensions/SS/regular fixed distributions from retirement should be good, everything else most underwriters won't touch as its just easier for them to use Freddi/Fannies rules. Though I will say given my age, even my pension seemed to cause them grief.

My honey went back and got a full time contract gig, just enough to meet conventional mortgage rules so we could refinance out of those rates this year. Still worth the 2 years we used Angle Oaks as we got the home we wanted and luckily just temporary pain point but hey at least they were willing to lend as it would have been way more painful paying taxes to pull it out of the market to pay cash. Good Luck.
Interesting link.

I saw, as you stated, that "Retirement Assets" won't qualify if you are under 59.5 yrs old, since you are subject to a penalty for withdrawal.

Then there is the section on taxable assets :"Depository accounts and Securities ", which have a requirement that at least one borrower must be 62 yrs old! I wonder about the rationale for that requirement??

So if you are RE under 59.5 yrs old and looking for a mortgage, seems like the only option would be to set up some type of income stream, based on everyone's experience shared (or pay cash!).
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Old 06-19-2021, 10:35 AM   #25
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Im retired and just secured a $214K loan to buy my daughter a house. I also have a mortgage on my house. I had read it would be difficult to get a loan and was really concerned whether I would be able to get a loan even though I have about 2.5 million net worth. Ive been retired for 6 years, 61 now but havent taken any money out of my IRA account yet, but I have rental income. However that only shows as $65K on my tax return.

Chase wouldnt touch me but I did find a smaller company that would. They liked that I was taking $3300 per month systemically from savings even though it wasnt an ira or 401k and they did count the depreciation on my rental property as income. An 800 credit score also helped.

The formula for counting your portfolio value, as I understand it, using a 1 million as an example is 1000000× 70%÷360 on a 30 year mortgage. So your million dollar portfolio only counts for $1944 per month as income.
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Old 06-19-2021, 10:52 AM   #26
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It definitely looks like it's key to find a broker who knows about these loans.

I retired at 61; DH was 15 years older and already retired. One year later we decided to downsize. We had $2.5 million in investments. We didn't have a regular draw- I knew what annual amount was sustainable but took out what we needed every 4 months or so and it varied. I prepared a nice exhibit showing the balances in all 4 of our accounts (checking and 3 brokerage) together with the total, by month, since retirement. The total had gone up by $100K since my retirement. We wanted to borrow $150K on a house we were buying for $258K.

I guess my exhibits didn't fit into their nice little boxes. I swear they ignored the assets and fixated on DH's SS and my $900/month pension. We got $100K.

Just last month the same company offered a refinance of my $67K balance plus $100K cash-out for "only" $156/month more. Whatta deal! Except that the interest rate will now be 4.5% instead of my current 3% and instead of being paid off in 9 years the mortgage will be paid off in 30 year. When I'm 98.
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Old 06-19-2021, 10:56 AM   #27
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For those of us delaying SS until 70,72, (75 on the table?), I wonder if showing you *could* take the current SS amount would qualify, even if you aren't taking it. I'm also delaying my pension for the same reason (mostly to give more years to do Roth conversions).

Seems those should count, as they are available, but I'm guessing the loan makers want to see the actual cash flow?

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Old 06-19-2021, 11:31 AM   #28
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I've done it 3 times - a purchase in 2016, refi in late 2019 and a refi in the last 90 days.

Purchase loan was through Wells Fargo (I've been a customer since the mid-80's) and the refis through Quicken Loans's affinity relationship with Schwab.

All were easy.
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Old 06-19-2021, 11:31 AM   #29
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For those of us delaying SS until 70,72, (75 on the table?), I wonder if showing you *could* take the current SS amount would qualify, even if you aren't taking it. I'm also delaying my pension for the same reason (mostly to give more years to do Roth conversions).

Seems those should count, as they are available, but I'm guessing the loan makers want to see the actual cash flow?

-ERD50
Your guess is correct. They require the actual cash flow.

It seems a few people on this thread managed to find lenders that would do real asset based loans. I never could, so good on them. I don't understand why it is so hard to find someone to do this. I guess being young and retired and FI is even more unusual than I thought it was.
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Old 06-19-2021, 11:55 AM   #30
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Your guess is correct. They require the actual cash flow.

It seems a few people on this thread managed to find lenders that would do real asset based loans. I never could, so good on them. I don't understand why it is so hard to find someone to do this. I guess being young and retired and FI is even more unusual than I thought it was.
I've always assumed that, although asset-based mortgages are very safe for a lender, there's not enough demand for them to bother setting up the processes, rules, software, etc.
Being young and retired and FI is fairly unusual, and only a subset of that group are buying real estate, and a significant subset of that subset is paying cash. Thus a low demand for asset-based mortgages.
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Old 06-19-2021, 01:17 PM   #31
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For those of us delaying SS until 70,72, (75 on the table?), I wonder if showing you *could* take the current SS amount would qualify, even if you aren't taking it. I'm also delaying my pension for the same reason (mostly to give more years to do Roth conversions).

Seems those should count, as they are available, but I'm guessing the loan makers want to see the actual cash flow?

-ERD50

When I asked in the past, I was told SS would not count as income if you were not collecting. A salary from GameStop would, though!
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Old 06-19-2021, 01:20 PM   #32
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Your guess is correct. They require the actual cash flow.

It seems a few people on this thread managed to find lenders that would do real asset based loans. I never could, so good on them. I don't understand why it is so hard to find someone to do this. I guess being young and retired and FI is even more unusual than I thought it was.

If you can do automatic transfers from retirement accounts, most of the lenders in the Costco mortgage program seem to accept those transfers as income.
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Old 06-19-2021, 01:29 PM   #33
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Interesting link.

I saw, as you stated, that "Retirement Assets" won't qualify if you are under 59.5 yrs old, since you are subject to a penalty for withdrawal.

Then there is the section on taxable assets :"Depository accounts and Securities ", which have a requirement that at least one borrower must be 62 yrs old! I wonder about the rationale for that requirement??

So if you are RE under 59.5 yrs old and looking for a mortgage, seems like the only option would be to set up some type of income stream, based on everyone's experience shared (or pay cash!).
Yes those rules were set up specifically for traditional retirees 59.5 and older, Fannie/Freddie rules don't like anything non-traditional.

As I mentioned there are true Asset Based Mortgage you can get one, but you will likely have significantly higher interest rates to make it worth the private lenders to lend. (Angel Oak Home Loans was the only one I could find 2 years ago in my area).

They just asked for my Vanguard statement which holds 95% of my invested assets, they took 30% off the top, then subtracted out 5 years of payments and if I had $500k or more left over I was qualified. They didn't care if it was in a tIRA/Roth or taxable or how I was getting the money out, or that I didn't have an income stream, just that it existed in my name and figured if I had that much money I could figure out how to access it to pay my bills.

It was painful to pay more in interest but far less painful than creating a forced tax event to pay cash or be trapped in a 72t for 14+ years. If I had been mid 50s, I might have just done the 72t but not in my mid 40s.
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Old 06-19-2021, 02:54 PM   #34
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I've heard from other posters that some banks will look at regularly scheduled tIRA withdrawals to your bank account as income.... I'm sure that others who have more direct experience with the issue will be along shortly.
This was exactly our experience. We ended up paying cash because an 850 credit score, several mil earning interest and no debt wasn't good enough. What we didn't have was "regular, formal and scheduled" withdrawals; we'd only withdraw when the checking account got low.
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Old 06-19-2021, 04:02 PM   #35
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Interesting link.



I saw, as you stated, that "Retirement Assets" won't qualify if you are under 59.5 yrs old, since you are subject to a penalty for withdrawal.



Then there is the section on taxable assets :"Depository accounts and Securities ", which have a requirement that at least one borrower must be 62 yrs old! I wonder about the rationale for that requirement??



So if you are RE under 59.5 yrs old and looking for a mortgage, seems like the only option would be to set up some type of income stream, based on everyone's experience shared (or pay cash!).


I could not open the link. The Fannie Mae version says you must deduct the 10% penalty before calculating the amount available to qualify. Maybe the conflicting guidelines are too goofy for lenders to be comfortable. Halfway down the page the guidelines are buried under the odd title “Employment-Related Assets as Qualifying Income”

https://selling-guide.fanniemae.com/...12-16-2020.htm
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Old 06-19-2021, 07:56 PM   #36
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I've always assumed that, although asset-based mortgages are very safe for a lender, there's not enough demand for them to bother setting up the processes, rules, software, etc.
Being young and retired and FI is fairly unusual, and only a subset of that group are buying real estate, and a significant subset of that subset is paying cash. Thus a low demand for asset-based mortgages.


This may be the reason they are so hard to find. We’re just not worth the time to process exceptions. Too bad. Asset loans to those like on this board would likely be the safest they would ever make.
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Old 06-19-2021, 10:06 PM   #37
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Reaching back into my mortgage origination experience from a few decades ago and being a vendor to those companies for many subsequent years.

If it's in the FNMA/FHLMC guidelines, there is a way, but......

The mortgage origination process is an assembly line. The more it fits with a standard and common process (and "typical" underwrting guidelines), the easier it is. While policies exist for asset-based loans, they are more the exception than the rule. Hence, the average lender has no experience, and will pass on the application due to lack of experience or unwillingness to invest the time to get a good loan through a system used to standardized processes.

My experience with Wells and Quicken involved people familiar with alternate approval methods-they understood my assets and income that could be derived from them.

No criticism of those with different experiences. From what I have seen, having a lender familiar with uncommon situations makes a huge difference. So, don't be disappointed if the local mortgage broker can't help you or charges you an above market rate. Start where you have your money, and if they can't help, consider moving it to someone who can.
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Old 06-19-2021, 10:29 PM   #38
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OP, if your taxable accounts are generating dividends, realized capital gains and interest income that is showing up on your tax returns, then you should be able to get a mortgage based on that income.

I agree with others that the vast majority of lenders will ignore assets or charge much higher rates if they will even do an asset-based loan.
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Old 06-19-2021, 10:31 PM   #39
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I should add that we have successfully done two refinancing transactions based on investment income. We have not started pensions or social security, nor do we make regular, scheduled fixed withdrawals from our taxable accounts. We just withdraw when we need funds. They key was having sufficient taxable income on our returns from our investments, and I’m sure high credit scores didn’t hurt.
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Old 06-20-2021, 09:00 AM   #40
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I should add that we have successfully done two refinancing transactions based on investment income. We have not started pensions or social security, nor do we make regular, scheduled fixed withdrawals from our taxable accounts. We just withdraw when we need funds. They key was having sufficient taxable income on our returns from our investments, and I’m sure high credit scores didn’t hurt.
Did that taxable income on your returns include irregular Roth conversions or irregular tax-deferred account withdrawals? Or more just interest and dividends? Include capital gains?
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