Big purchase, how to pay?

[Finance Dave]

Banks seem not to be interested in your assets - only income. We had a hard time getting a loan for our current condo several years ago because we hadn't sold our old place. At the time, my only income was a modest pension. They said that wasn't enough for a $400K loan. They asked to see our 1040s for 3 years. When they looked at them, they said "You have all kinds of income!!" I said "Say what??" We had converted several tIRAs to Roths and that was 1040 income! Don't ask how converting tIRAs to Roths would satisfy a banker's requirement for income - but it did. Heh, heh, in fact, converting to Roths meant we had less money because we had to pay the taxes! Go figure.


BUT, to answer your questions, unless things have changed, banks want you to have income; A lot of it.

thank you. We have my $15k pension now, and will add about $30k SS for DW this year…and then we may withdraw from TIRA or do Roth conversion also. If they look at our 2022 return they’ll see about $330k “income” from cap gains from sales of our rentals lol…that’s a one time thing but based on your comments they might see that as good enough lol

 

[Koolau]

thank you. We have my $15k pension now, and will add about $30k SS for DW this year…and then we may withdraw from TIRA or do Roth conversion also. If they look at our 2022 return they’ll see about $330k “income” from cap gains from sales of our rentals lol…that’s a one time thing but based on your comments they might see that as good enough lol

I hope that would satisfy them.

Of course, in our case, they were JUST coming off the no-doc, bundled debt, etc. '08 collapse and were over-reacting. Maybe that's all gone by the wayside by now.

I recall talking to the banker as she was telling us (at first) we didn't have enough income. To avoid verbal violence, I walked out of the bank for a couple of minutes while DW stayed and listened. When I had cooled down a bit, I started to walk back into the bank. Right there, on the front door was a big sign that said "Bad credit? No credit? We Can Help!" I had to wait a few more minutes outside to get over that one! It's funny in the retelling but it wasn't funny at the time.

Oh, and one banker we talked to said, "Well, could you put half down?" We both walked out on that bozo and it was OUR bank! The bank where our checking had $50K. The bank where we had an account for 10 years. Many bad memories of those days.

Best luck!

 

[2retireearly]

Whatever you do, realize that if you take out of your taxable account, you'll be paying big taxes on it..so that makes the purchase a lot more expensive, when you gross up the amount you are taking. Also, if you are on Medicare, beware of upping your Income, but taking moneys out of accounts that are considered income, as then you will be stuck with a bigger medicare part B and D premium, because of IRMAA. So add that cost to the cost of what you are buying. As a retiree it is harder to get a nice mortgage. as they don't look at you assets..but just your income. Since I try to play with my income, to make it as low as I need to live well, to control my taxes, my large IRA is meaningless...the mortgage company only looks at my Soc Sec, Pension and small amount I take monthly from my pension.

 

[RobLJ]

I keep about 5% of our AA in cash. I’ve paid cash for boats, cars, last home and it was always planned so I made sure I had cash on hand. If our cash isn’t adequate I’d accumulate dividends (mostly), or sell mutual funds (rare)The only tricky one is buying a house before the old house sold, but we managed that last time. That might be a case where I’d take a mortgage on the new house, and then pay in full once the proceeds from the old house came through - obviously you’d have to make sure the terms allowed that without penalties.

We did the same when we moved to Reno in 2015--took a mortgage on the Reno house, then paid off the mortgage 3 months later (obviously, get a non-prepayment penalty mortgage). It took a while for the Houston and Colorado cabin sales to settle. However, DW was still working as was I (half-time). I don't know how the mortgage process works for retirees like us who are withdrawing from IRAs/403bs.

 

[Route246]

Have you looked at a margin loan?

 

[Finance Dave]

No

 

[dmpi]

I generally sell my losing stocks and hang on to my winners. Over the years I ended up with a large capital loss that carries over year after year minus the $3,000 I can claim every year. This stock loss is handy if I need money because I can sell some of my winning stock and offset it by the loss so it has no effect on my income.