The new rules, however, just might make all the difference — if you can find a loan officer who's willing to do the necessary legwork. Jeff Lipes, a past president of the Connecticut Mortgage Bankers Association, says the new calculations to boost retirees' eligibility go like this: Let's say a retiree has $1 million in an IRA or 401(k) and wants a 30-year fixed-rate mortgage. Lenders calculate 70 percent of that $1 million (the balance is reduced by 30 percent to account for market volatility; no rate of return is assumed). They divide that $700,000 (that's 70 percent of $1 million) by the term of the loan (such as 360 payments for a 30-year mortgage).
Using this formula gives the borrower an extra $1,944 to show for monthly income. So consider Eberle as an example. That $1,944 in assets would be added to his $2,400 monthly Social Security benefit, almost doubling his income and enhancing his ability to qualify for a mortgage. (By the way, borrowers aren't required to tap those retirement assets.)
For retirees, "this can make a significant difference in determining whether they qualify or don't qualify," Lipes says.
