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Will Retirees Finally Get a Mortgage Break?

Refinancing on a fixed income can be challenging. But the rules may be easing

Using this formula gives the borrower an extra $1,944 to show for monthly income. So consider Eberle as an example. That $1,944 in assets would be added to his $2,400 monthly Social Security benefit, almost doubling his income and enhancing his ability to qualify for a mortgage. (By the way, borrowers aren't required to tap those retirement assets.)

For retirees, "this can make a significant difference in determining whether they qualify or don't qualify," Lipes says.

But there is a caveat: While the new computations can help retirees qualify for a mortgage or refinance, experts say there's a scarcity of loan officers who know about the formula or who are willing to use it.

Syndicated real estate columnist Ken Harney wrote about these favorable new guidelines in May. What happened next was shocking. Scores of retirees rushed to their banks to apply for mortgages but were turned back by bankers who were unfamiliar with the new rules. Harney says he received about 100 emails from retirees around the country who'd been rejected.

Working with retirees' applications may take more time and effort, he says, and not every lender is willing to do that.

To save yourself time as you shop for a mortgage or refinance, Harney says, ask whether the lender is familiar with and uses the Fannie Mae or Freddie Mac retirement fund annuitization procedures. If they don't, walk out the door and find a lender that does.

Carole Fleck is a senior editor for AARP Bulletin.

Tips to Consider

  • Talk to a banker you already have a relationship with.
  • Apply to a community bank. Their rules to determine eligibility are generally more flexible. And, they may be more willing to work with you.
  • Sell your house using the equity, and perhaps some of your savings, as a down payment on a smaller house or condo. It may be easier to get a smaller loan if you're putting down, say, 50 percent.
  • Consider renting and using the equity from the sale of your home to invest or save.
  • Apply for a 10- or 15-year mortgage instead of a 30-year mortgage.


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