Declining Asset Loan Option

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In the last post, I commented on a situation where a retiree with over half a million dollars in a brokerage account could not count his $4,000 monthly withdrawals from that account as “income” for a mortgage qualification.

So here’s what he can do with his current assets….I represent an investor who will do a “declining asset” loan for this retiree.  (Not all lenders will do this type of loan.)  We start with his account balance and multiply by 70%.  This is to adjust the balance for potential stock and bond market fluctuations.  That gets him to $350,000.

Then to fit this amount into a 10 year monthly income forecast – I divide by 120 months.  That yields about $2,915 per month in available income.  And that is all the “income” I can use based on his assets.

Retirement Income

This retiree told me that he had been “prequalified” by another lender for the full $4,000 “income” that he withdraws every month.  I asked, “Did that lender ask you any questions about HOW you earn your income?”  His response was, “No.”

We at Dunwoody Mortgage are trained to ask important questions up front.  By digging in just a little bit, we might discover potential underwriting road blocks early in the process.  Then we can either determine a way to work through the road blocks or stop the process early, before the buyer and the Realtor waste a lot of time and the buyer’s money (for home inspections, appraisals, etc.) on starting the home purchase process when they cannot win underwriting approval.  His Realtor was very appreciative that I helped him avoid wasting a lot of time searching for houses that this retiree could not afford.

If you know a retiree who is thinking about buying a home in Georgia, tell them to carefully consider how their assets are allocated and how they receive their income.  Not all assets and income are treated equally.  Have them call or email me at Dunwoody Mortgage Service.  We will discuss their options and we can even help them coordinate with their financial planner if necessary.  I can help them structure the deal right the first time – without wasting their time on homes that they cannot buy using their current asset accounts.

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