Purchasing New Home After FIRE

[Beryl]

Planning to sell and buy a new home out of state YE2014. (Mom passed away and I need to move closer to other family.)

My current home is paid off and in a seller's market. My new home should cost 75% or less than what I should get for the current one so I'm not planning to have a mortgage. I'm just starting house hunting and may end up building to get what I want -- likely my last home before assisted living. I have no debt but I don't have enough liquid to pay cash for the new house. I'd have to cash out CDs, sell stocks and maybe even dip into an IRA account. I'd rather not do that and avoid the taxes.

It was easy when I was working with a good salary and high FICO, I had lenders competing for my business even during 2007-2010. My FICO is still well over 800 but my income is one third of my 2011 salary! I haven't tested the waters yet so I might be pleasantly surprised when I contact a few lending institutions next week.

Bridge Loan?

Anyone have experience with buying a home AFTER retirement and/or advice on how to do this as painless as possible?

 

[truenorth418]

I am in a similar situation. Since time is not of the essence, I would consider putting your current home on the market first, wait for it to sell, then move into a short term rental situation in the new city before buying there. This has at least two advantages. One, you'll have cash in hand when you buy your new place. No need for financing at all. Two, you'll have more time to explore the new city before buying, so you'll have a better handle on where to live and what's available. Why rush it? Use your ER flexibility to your advantage.

 

[NanoSour]

Here's some knowledge you may need before talking to a mortgage broker.

https://www.guaranteedrate.com/resources/how-to-obtain-a-mortgage-with-no-income

Be advised most brokers will not be aware of the asset-only option. You'll have to educate them and expect to pay 1% above going rates.

 

[Beryl]

Here's some knowledge you may need before talking to a mortgage broker.

https://www.guaranteedrate.com/resources/how-to-obtain-a-mortgage-with-no-income

Be advised most brokers will not be aware of the asset-only option. You'll have to educate them and expect to pay 1% above going rates.

Nice. Clipped to Evernote!!! The calculation makes me appear quite credit worthy.


I'm looking to buy first because I hate being in my home when selling. I like to move and let my agent take care of all of the preparations.

 

[daylatedollarshort]

One credit union we belong to approved us to buy a second home by making the loan on the second house a rental. Then the rent would count as income. So with our liquid assets (enough for 36 months worth of income) and the potential rent income we were pre-approved.

Our other credit union wouldn't count the potential future rent since we hadn't been landlords before, but they would count two months worth of transfers from our retirement accounts to a checking account as "income" in order to buy another house. We just had to have enough assets in the retirement accounts to make the transfers for 36 months.

 

[Katsmeow]

There are a couple of options for retired people that might help.

When we bought a house after DH retired and I semi-retired, we relied in part on income from his IRA. Basically for that to "count" as income we had to set up a systematic transfer of $X per month. At first I was told this needed to be effect for a certain period of time, but later I was told the rules had recently changed and it didn't have to be ongoing for as long. Not sure what the current rules are. I proved this, BTW, just by printing out copies of Vanguard statements.

There are also what are called asset depletion loans. Those are kind of complicated so you should do a search for them. Bear in mind that the rules on all this may change over time so you may need to talk to a mortgage broker about the most current rules.

 

[Beryl]

So helpful. Thank you very much!

 

[OAG]

I took a loan against CD's a long time ago at PENFED. 2% over the rate of the CD up to about 90% of the CD principal. Worked for me as a personal bridge loan. BTW no payment required until the CD maturity and can be paid off early. Understand program still in operation at PENFED.

 

[FIRE'd@51]

Have you considered a margin loan? Depending on the broker, the rate may be lower than a bridge loan. This is a very convenient way to get cash, so long as the loan is a small enough percentage of your taxable portfolio, so as not to put you at risk of a margin call should stocks drop a lot. Also, the interest is tax deductible against portfolio income if you itemize.

 

[eytonxav]

I had a HELOC that I drew from to cover the down payment for the new house until our old house sold and closed. The way the timing worked out, it cost me nothing.

 

[Midpack]

I am in a similar situation. Since time is not of the essence, I would consider putting your current home on the market first, wait for it to sell, then move into a short term rental situation in the new city before buying there. This has at least two advantages. One, you'll have cash in hand when you buy your new place. No need for financing at all. Two, you'll have more time to explore the new city before buying, so you'll have a better handle on where to live and what's available. Why rush it? Use your ER flexibility to your advantage.

That's our plan, rent for a year to 1) make sure we like the new state/area and 2) learn neighborhoods before we pick our last home. We would put our current home up for sale about 6 months in to give ourselves time to be sure about the general region, and hope to go month to month if necessary after 12 months. But it sounds like the OP already knows for sure where he/she is going to live, so maybe not applicable. And I can well understand the desire to not own two homes at once and having the funds tied up.

 

[frayne]

Why don't you just wait until your house sells and then buy or build your new house. Nothing I hate more than going through the loan process or having a mortgage

 

[phil1ben]

"I like to move and let my agent take care of all of the preparations."

The above line is very scary to me. I am in the RE business and allowing a realtor to do anything more than introduce the parties requires more trust than my experience justifies. Remember they are in the game for their commission not to insure your transition goes smoothly.

Also, do not rely on what the realtor guesses you will get for your house. They do not want to lose the listing by opining too low. If you live in a development where where similar homes have recently sold you can make an educated guess. If your house is more remote and somewhat atypical, it may be difficult to guess the ultimate sales price. It would be good to know the number (by an actual sale) so you can determine how much you can afford on the buy side. Good Luck.

 

[REWahoo]

Why don't you just wait until your house sells and then buy or build your new house. Nothing I hate more than going through the loan process or having a mortgage

+1

Viewed from the perspective of "what option is the least hassle", selling your existing house first, then renting for a while in your new location if necessary is probably the best option. You'll have to rent for a while anyhow if you decide to build.

 

[RockyMtn]

Add me to the sell the old house first camp. Selling takes time and I don't know that I'd just let the Agent handle everything.

Once the house sells and you have cash in hand renting or even buying in the new location can be accomplished quickly compared to a sale.

 

[Beryl]

The above line is very scary to me. I am in the RE business and allowing a realtor to do anything more than introduce the parties requires more trust than my experience justifies. Remember they are in the game for their commission not to insure your transition goes smoothly.

Also, do not rely on what the realtor guesses you will get for your house. They do not want to lose the listing by opining too low. If you live in a development where where similar homes have recently sold you can make an educated guess. If your house is more remote and somewhat atypical, it may be difficult to guess the ultimate sales price. It would be good to know the number (by an actual sale) so you can determine how much you can afford on the buy side. Good Luck.

Wait a minute! When I say I'd let the agent do everything, I don't mean that I'm hands off. I mean that I move first and let my agent hire repair/staging people and manage it as a rental, if necessary. I approve everything that costs money and needs HOA involvement doing the preparation. I also set the sale price and sign rental agreements.

I've sold my last 3 residences this way but my income supported multiple mortgages. I have no mortgage now but a tiny income (pension). I shouldn't have a problem getting a short-term loan and/or mortgage if my assets are factored in.

 

[Beryl]

I had a HELOC that I drew from to cover the down payment for the new house until our old house sold and closed. The way the timing worked out, it cost me nothing.

@DFW_M5, I'm glad to hear about this because I want to pay cash for my new house and own it outright. I don't mind having a lien on the old one. It is a psychological "debt-free" thing. If I rent out the old house for a short time, that loan will factor into the expense side of the investment property.

My CU says they'd cover 90% of the home value and it would cost around $2K to cover closing plus interest until paid off. The HELOC closing is 30 days so I'll apply before signing on a new house and not disclose my plan to sell. Who knows? My new house might be my winter retreat. I'll shop around and see if I can get a better deal anyway.

So appreciate these ideas. I knew ER forum would come through for me.