Planning is Key if you are thinking of retiring and you want to buy or refinance a home.
Just ask Ben Bernanake
Yes even the man who was the head of the Federal Reserve until recently thinks lending may have been tightened a little to much! He recently let it slip in a speech he was doing that he himself could not refinance his house recently due to the tight lending guidelines.
Why you might ask?
In his case he was changing jobs and to make it even worse he became self employed.
It does not matter that you have an awesome credit score and have a great net worth it is about the guidelines. To get a Home Loan after you retire you will need
- A two year work history if you changed job fields.
- If you are staying in the same field you should be able to qualify you will need to have two pay stubs typically before you can close a loan.
- The other option is a Offer Letter with New Pay Rate and Start Date and they are able to verify it is the same field of work I do believe the underwriter can use this.
- Beware Self Employment is a tough one these days their are no real options unless you have a solid track record and even then it will be a tough road!
My post is especially for Military Buyers who will be Retiring it gets even more interesting!
Hoe Buying 101 when thinking of Retiring.
Before you decide to Retire you must make sure you look at your options or you could make a huge mistake! Especially if you are leaving your duty station and staying in the same area. If you are leaving your duty station and moving to another state you may have a little more flexibility. *Call me for details.
This week I worked with a Military family who were looking forward to buying a home they had been renting for two years in our area and were ready to buy their dream home. They had come to me pre-approved with USAA and excited to get started house hunting. They had looked at buying a home last year when they first arrived but decided to hold off and rent and get to know the area. They had positioned themselves that this was their last duty station so now they could be settled by family and felt great about their decision to buy.
We looked over the available homes based on their needs and wants and budget and schedule a Sunday to look at homes. The kids were excited and Mom and Dad were very focused on making sure they were looking at the homes with wide open eyes so they did not miss anything.
Everything was going great
House 1 was not the one, it was lovely but the wife preferred a more open feel then this home offered.
House 2 was the same floor plan in the same community but offered a side sun room off the formal rooms which made the home feel open and bright it was a hit! The entire family loved it the yard was 3 acres of which 2 acres of back yard was fenced. I had a good feeling about this one.
House 3. Was a builders model home that was for sale but sadly the builders representative misrepresented the price when my buyer first spoke to her and it was higher than he could spend. She had another home ( of course she did) that may work for them that could be ready in four months.
That is when the wheels fell of the cart!!
My Veteran's wife said they would even consider building since they do need to move until next August because that is when my husband retires! He jumped in and said but we would like to move right now the kids are in private school and we can move anytime if we find the right house.
Hold up here I needed to have a sidebar right then!!!
I pulled him aside and asked him what is his retirement date and he said August 31st 2015.
I said did you tell this to USAA when you got pre-approved he said the pre-approval was done a few months ago and retirement did not come up.
OK..
I then said I need to make a call but I do believe we have a timing issue that may postpone when they can buy a home.
Just as I thought there was now a road block in front of me.
So much for wasting a Sunday house hunting with unqualified buyers. Pre -Approval means nothing if the lender does not have all of the information. This would have come up sooner or later better now. I felt awful crushing the dream of home ownership for a family of six not to mention the home owners and builder who hoped they would buy their home. I wish I had the opportunity to speak with them several months ago.
Here this and hear it loud and clear...
"If you are retiring in less than a year from the military and you want to use your A VA Loan to buy or refinance it will not be able to happen."
The lending rules just will not allow it. When the lender requests your LES statement it will have your expected separation date on it. Unless you can qualify for a home on your reduced retirement income you will not be able to buy at this time. Yes it's almost a year away but those are the rules. Worse yet you may have prevented yourself from buying for up to two additional years if you change the type of work you do!
I am sorry to say we missed the window of opportunity by 60 days . If this couple had come to me had in June or July of this year we would not have had an issue the LES would not mentioned retirement just reenlistment was possible.
So I went back to my buyer and explained where he was at with his VA Eligibility. My first question is buying a home important enough to you to reconsider your retirement date?
They are thinking it over...
So how does anyone in this situation get a VA Loan ?
Well if your spouse had a full time job the lender could use their income to help qualify since the military members income from an underwriting standpoint looks like it will drop in half. For my couple this was not an option.
Here is what you need to know.
If you are in the 12 month window you need a commitment letter with a statement of what you will be earning and your start date. The underwriter should be able to work with this. Typically you can get this about a month or so before you start once you get a commitment. So no house shopping until then
If this is not possible you will need to start your new job and you will need to collect two pay checks before you can close on your home loan. You can start house shopping when you start your new job or just before.
- You could reconsider your retirement date if that is an option for you like my buyers. If you want to look at this option look at the big picture.
- Will I be transferred?
- Do I take an unaccompanied transfer as to not uproot the family this will depend on where you are now and where you want to retire.
- What will be the home prices be two years and how will that affect my decision?
- What are the interest rate predictions?
- If you do re-enlist this would give you time to to secure a home because your pay would allow you to reset the clock now that you have all our facts.
- Or you could stay with your plan of retirement and reset your goals to work with your new reality. It is not the worst thing in the world.
If you or someone you know is retiring in the next year or two and also thinking of making a move the earlier they talk to me the better. Please forward this blog post to them. It is critical that we create a plan that works for them based on their needs, wants and situation. We will talk about interest rates, appreciation, expect future income and a many other things to determine what is best for you and your family.
I am just a phone call away and happy to talk with you about your options.
Have Questions about your specific situation just Contact Me
Feel Free to call or Text me at 703-801-9367
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