People in all stages of life, including retirement, dream of homeownership. Maybe you’ve decided to upsize, downsize, or you’re a first-time buyer who’s never felt ready to take the plunge before. While you’re looking for that perfect house, remember these five things about buying a home in your retirement years.

Benefits of Homebuying in Retirement

After you retire, you have a clear picture of your money and how you’ll need to spend it. This helps you set a manageable budget that may not have been as easy before you retired. In addition, you can choose amenities that will benefit you as you age. A single-story home, or one where yard maintenance is included, are smart choices for retirees. Deciding on your location is another benefit. For example, maybe you want to be close to your grown children, or in an area that’s easily walkable.

Your Finances Play a Big Role

Many people in retirement know that their finances aren’t going to improve much, whereas homebuyers still working may snag raises or change jobs to make more money. To qualify for a mortgage in retirement, you will need to show income that is consistent and stable. Social security is one income stream that is viewed as stable, meaning you won’t “run out” of it before you pay off your mortgage.

Another important thing that retirees need to know is, unlike their working counterparts…

…Assets Matter a Lot, Too

When you’re buying a home in your retirement years, your assets, which are the items of value you’ve accumulated, play a big part in getting approved for a mortgage loan. Retirees may have a large percentage of their wealth tied up in assets. The good news is lenders will view that as a positive and look at 70% of your 401(k) and/or IRA accounts as income that helps you qualify for a loan. Why not 100%? Because stocks and mutual funds can quickly change in value due to market fluctuations.

Debt Can Hurt Your Chances

A large debt load doesn’t help anybody secure a loan, and it may be even more of an obstacle for those in retirement. If your debt-to-income ratio is too high, lenders may decide you’re too risky and not approve you. Keep your debt low if possible, and if you already have it, work on paying if off quickly.

A Great Credit Score Goes a Long Way

Retired homebuyers with great credit histories will be miles ahead of those who haven’t managed their credit wisely. Past behavior is the best indicator of future behavior, so a credit score of over 800 helps secure a loan. If your score is lower than you would like, you may need a bad credit mortgage. 

Buying a home in your retirement years is possible, but it may present unique challenges. Let’s talk through your options today.