[quote=SK in CV]So it actually has nothing at all to do with being able to use $4K to $7K in mortgage interest, only the amount of the mortgage they’re comfortable with?
If they’re seriously “cash rich” and collecting SS, then they would have no problem qualifying for a $200K mortgage. They’d need income of less than $35K a year.[/quote]
You might be surprised, SK. Mortgage lenders today are REALLY hung up on “monthly income” for qualification purposes. It’s not that easy to get a “prime” mortgage when one’s “monthly income” is unverifiable or they are primarily living off passive income … ESPECIALLY if they haven’t yet taken their pension or all of the pensions they are or will be entitled to take.
Lenders don’t seem to care about available assets as much as W-2 income because a borrower is free to deploy those assets as he wishes during his mortgage term. He/she could essentially take out a high-ratio mortgage with a very low documentable income (~$35K, as you stated) and then immediately thereafter “spend down” his/her assets for any number of reasons.
On an ARM or 30-due-in-5 (or 7) loan, yes, a portfolio lender will consider assets in lieu of monthly income. But “Frannie” lenders will not nor will VA/FHA lenders.
For instance, I know a few veterans nearing retirement who have not yet used their VA funding entitlement. They could feasibly use it to buy a retirement home but would need to do so while they can still qualify for it conventionally (through W-2 income). A LOT of the over-50 crowd falls in the category of having assets but insufficient income to qualify for a mortgage today.
In answer to your first question, it has to do with exactly how much MID they will need to shield income in retirement (for a set amount of time … usually 3-7 yrs). After that period, the borrower plans to retire their mortgage entirely.
