Retired and house hunting? How to finance your next home purchase

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    Retirees who are considering a move that involves buying a home may want to consider how they’d finance the purchase.

    It can be tricky for seniors to get a mortgage in retirement, said Al Bingham, a mortgage loan officer with Momentum Loans in Sandy, Utah. Not only are lenders still more cautious about extending credit during the pandemic, retirees generally have left a steady paycheck behind.

    “You can have a lot of money but show very little income and have difficulty qualifying for a mortgage,” Bingham said. “It frustrates a lot of them.”

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    And although interest rates are still very low, they’ve been creeping upward. The average interest rate on a 30-year mortgage is about 3.25%, while for a 15-year fixed-rate mortgage, it’s about 2.5%, according to Bankrate.

    Combined with surging home prices and limited inventory, the situation may be even more challenging for retirees, Bingham said. This means it can be worth doing some strategizing and planning ahead.

    Of course, the typical aspects of qualifying for a mortgage — such as having a good credit score and monthly debt that isn’t too high — would apply, as well.

    The specifics will depend on the lender and the type of mortgage you’re seeking. Loans that are backed by Fannie Mae and Freddie Mac come with requirements that lenders must adhere to, while private mortgage lenders may have their own set of standards.

    Qualifying based on income

    The most common way for retirees to get a mortgage is by qualifying based on income, said certified financial planner Daniel Graff, a principal and client advisor at Sullivan, Bruyette, Speros & Blayney in McLean, Virginia.

    Lenders generally will look at your last two years’ worth of tax returns to see what that amount is. It may include, for instance, Social Security, pension income, dividends and interest.

    However, your taxable income may not be enough to qualify for the loan on its