Buying a home as a senior can be challenging. If you are buying your last home, it can come with a lot of tough decisions. Is this home where you want to spend the rest of your life? Which house will best accommodate potential physical challenges or a changing lifestyle? How can you pay for a home on a fixed income? There are lots of moving parts to buying a home as a senior. Here are some tips to help with the process.
Buy or Rent?
The first thing to consider is whether you want to buy or rent. People living on a fixed income might benefit from regular rent payments. Regular payments might give you room to use your retirement savings for other essentials like food, transportation, and travel. On the other hand, owning a home comes with pride of ownership. It also comes with the ability to decorate and renovate as much as you want. This can be helpful for those who want to “age in place,” or want to make renovations.
Once you figure out whether to rent or buy, it’s time to take a look at the location. Where do you want to potentially live for the rest of your life? Many people might choose to live close to family, friends, and support systems. Others might consider living somewhere they have always wanted to live but have never gotten the chance. A move to a warmer climate could be appealing as well.
Many senior home buyers find it helpful to live close to the essentials like grocery stores, shopping, and care providers. Traveling is stressful normally, and driving a long way for basic needs can cause extra undue stress. Choosing a location close to public transportation will help you navigate day-to-day life a little easier.
Also, the neighborhood you decide to move to has a huge impact on your quality of life. A quiet neighborhood with pride of ownership will be less stressful than one in disarray. Looking into 55+ communities is a good option as well, especially if you are moving far away. A senior community is filled with people in the same stage of life, which provides opportunities for making friends and lots of useful amenities.
The next thing to consider when buying a new home is accessibility and ease of living. Many senior buyers will buy a new home with the goal of downsizing. Less space to care for is a plus, but you’ll downsize your belongings as well. A small space with too many belongings is even more stressful than a large space that is hard to maintain.
When downsizing, you’ll want to think about whether a house or a condo is right for you. Houses come with your own outdoor space to use however you would like. A house is also likely what you have lived in for years, so it’s what you’re used to. However, some seniors might find homes with yards to be too much to maintain. If this is how you feel, a condo might be a great option for you. Condos are typically smaller spaces, but some can be over 1,500 square feet or larger. They don’t require any maintenance to the outside of the building or to the common areas, as that is taken care of by the HOA.
If you decide to buy a house, you’ll want to make sure that it suits your accessibility needs. Will stairs be an issue? Try to find a one story, or a home that already has a stair lift. If you like having a lawn but caring for it might be an issue, living in a community that includes lawn care services is a great option. If you have physical limitations, a home that already has accessibility add ons (like door handles instead of knobs, ramps, grab bars in the bathroom, or wider doorways), or has room for them is a must. You will need to factor the cost of installing these features into your budget if they are not already included in the home.
Seniors can get a typical mortgage, but it might be more difficult to qualify if you are living on a fixed income instead of income from a job. You can pay for the home in full with cash, but this might not leave enough in your savings for essentials. Here are some other options for financing your new home.
Many lenders will allow you to use your Social Security income as qualifying income. To be eligible you will need either an award letter or proof of current receipt. Since Social Security is untaxed income, it can be “grossed up,” meaning that you can qualify for a larger mortgage by increasing your qualifying amount.
You can get an asset depletion loan, which qualifies you based on your liquid assets (the money you have in savings) instead of a job income. The lender will divide up your assets by the number of months in a typical mortgage payment schedule to get your monthly “income.” For this type of loan you need a significant amount in savings.
You can get a loan with Fanny Mae/Freddie Mac senior home buying programs, which use your assets from 401K, social security, or other retirement accounts. In order to qualify you must have full access to these funds, and be able to prove that the funds will last for a minimum number of years.
If you have children who can qualify for a mortgage, you can buy your home with them as a cosigner. The child would need significant income, and would need to show that they have the ability to make regular mortgage payments.
Another popular option is to get a loan that allows you to access the equity in your home with monthly payments. Some of these options are a home equity line of credit (HELOC), a home equity loan, a reverse mortgage, or a cash out refinance.
Hire the Professionals
The home buying process is much easier with the professionals by your side. Lenders and real estate agents who have been through the process hundreds of times can guide you through buying your new home with skill and ease. If you would like some help connecting with a top notch lender or agent, send us a message! We are always here to answer questions.