Buying a Home on Social Security in Wichita Kansas Are you one of the thousands of people in Wichita who are living on a fixed income? While that can prove to be challenging, it doesn’t mean that you can’t do things that everyone else can, like purchasing a home. If buying a home is on your long to-do list as you continue to live through retirement, know that getting a mortgage with only your Social Security as your income is still possible. While not having a regular income from a job or retirement savings account will make it more challenging to secure a mortgage, there are different ways that you can go about accomplishing that goal. Throughout this article, we will discuss the various methods many seniors and others living from only their social security income use to secure a mortgage on a fixed budget. How is Applying for a Mortgage Different on Social Security? While there is no age limit on obtaining a mortgage or loan from a bank due to federal discrimination laws, it might be more challenging if social security checks are your only form of income. Social security income is no different than income earned from a job because it is all considered in your gross income or how much money you make per year before taxes are taken out. Remember, that here at JR Mortgage, our loan officers will still consider your monthly income when you are applying for a loan, just like anyone else. As a mortgage broker, we will also do a deep dive into your credit history to confirm that you are eligible for a loan based on your credit score. As long as you have a qualifying debt-to-income ratio and available immediate cash for a down payment on the loan, you should be able to qualify. Money – Debt to Income and Down Payments As mentioned before, a lender will check your DTI (debt-to-income) ratio. This number is vital when you are applying for a loan. In general, lenders will want all of your monthly debts, which include car payments and monthly mortgage payments, to total less than 43% of your gross monthly income. This ensures that your debt won’t be too high and increases the likelihood that you will be able to make your monthly mortgage payments. Another critical factor in any mortgage application is what you will apply towards the down payment. You can qualify for a conventional mortgage, which is the most common type of mortgage with only 3% of your home’s final purchase price. Some loans will also qualify you if you have 0% down. Obviously, having a larger down payment will boost your odds of qualifying for a mortgage, but it’s wise to come up with as much of a down payment as you’re comfortably able to. Lenders appreciate it when borrowers have committed a larger amount of money to their homes before they start making mortgage payments because it shows more commitment to the process and financial stability. What Type of Loan Option is Right For You? Even though your primary source of income is from your monthly social security checks, you can still qualify for numerous loan types without discrimination. Some of the best loan options available to you are still what’s normal for most other people with ordinary incomes. But what are the two most common types of loans? Conventional Loans As long as you have a credit score of over 620 points, you’ll be able to get approved for most conventional mortgages. These conventional mortgages make up most of this country’s closed mortgages because of their mass availability and limited down payment options. Conventional loans also have a little stricter requirements than government-backed mortgages like VA loans or FHA loans, but are easily attainable with the proper preparation. As mentioned before, you will need to have a credit score of at least 620, and you’ll need to maintain a debt-to-income ratio of no more than 43%. In addition, you’ll need to have a minimum down payment of 3%. If you would like to avoid PMI (private mortgage insurance), you will need to put 20% down. Many lenders and banks will also have the property appraised, verifying that the home’s value and overall condition meet their standards and qualify as a good investment for you and the bank. Conventional loans can be used for a primary residence or secondary residences/investment properties. VA Loans If you or your spouse is a Veteran, probably the best loan option for you to apply for is a VA loan. VA loans are government-backed and provided by private lenders such as banks and other mortgage companies. The VA will guarantee a portion of the loan allowing a lender to provide you with more favorable terms, which is best if you’re on a limited income like Social Security. Some of the numerous benefits of you using a VA loan are that no down payment is required, the interest rates are extremely low, the closing costs associated with the loan are limited, and there is no need for PMI or private mortgage insurance as there is with conventional if less than 20% is put down. One of the downsides to a VA loan, however, is that the loan must be used on a primary residence. Private Mortgage Insurance Explained PMI or private mortgage insurance is a type of insurance used to back your loan. This insurance will kick in and protect your lender if you stop making payments on your loan. This type of insurance is only required with private loans and not government-backed loans, as noted above. PMI is not required on a VA loan. PMI is typically required if your down payment is less than 20% of the home’s purchase price with a conventional loan. Private mortgage insurance is based on the cost of your mortgage and typically costs between 0.1% of your loan and up to 2% of your loan per year. Final Thoughts Don’t let being on a limited income or only having a Social Security check stop you from achieving your dreams. If home ownership is something that you’ve yet to attain but can now make possible, go ahead and chase that dream. As Wichita’s premier mortgage brokerage, we help those on social security every day achieve their home ownership dreams and we’d love to help you. If you are looking to take the first step toward home ownership, or just want to learn more, reach out to us below! With the proper guidance and assistance, you’ll be able to find a home that you can live in for years to come. Please follow our blog for more information about mortgages and all things real estate. JR Mortgage Group Inc. Click to Call or Text: (316) 247-9639 This entry has 0 replies Comments are closed.