How Retirees Can Qualify For Mortgages When Paychecks Stop

Bond yields slip under 4 percent as we track real-time rate pressure even through an AWS outage. We share three proven ways retirees can qualify for a new home, and why agents should vet lenders using NMLS to protect deals on both sides of the table.

Listen Now for More Great Info on the Following - 
• asset dissipation underwriting for retirees
• starting retirement distributions to qualify
• child-buys-for-parent primary residence option
• protecting family equity from care costs
• why experience and licensing history matter
• how to vet lenders with NMLS Consumer Access
• second-opinion strategy to secure better terms

Look below in the comments for link mentioned in this episode and leave us a comment. If there's anything that you want us to cover or talk about, let us know!

Link mentioned by Nikki - https://www.nmlsconsumeraccess.org/?trk=organization_guest_main-feed-card_reshare-text

Chapters

• 1:12 Live Market Update And AWS Outage
• 1:49 Bond Rally And Rate Outlook
• 2:58 Fed Cuts Versus Mortgage Rates
• 3:51 Current Rate Ranges And Buydowns
• 5:19 Planning Moves Into Retirement
• 7:51 Asset Dissipation Loan Explained
• 9:08 Using Retirement Distributions To Qualify
• 10:51 Child Buys Home For Aging Parent
• 13:10 Protecting Equity From Care Costs
• 15:54 Why Experienced Lenders Matter

Transcript

SPEAKER_01: 0:37

It is October 20th, and this is your weekly market update. Nikki, what's going on today?

SPEAKER_00: 0:44

Good morning, everyone. Happy Monday. So news over the weekend, of course, has to do with the AWS shutdown or the issue that they're having with their hosting of websites. So apparently 40% of the internet sites are hosted through AWS in some sort of capacity. So a lot of people are experiencing some shutdown of websites or partially working websites. From my standpoint, you know, I've got partially working applications, I've got partially working, you know, software systems that, you know, are having some issues along the way, but hopefully they'll be able to solve it soon. We do know that even though most of the reporting that happens from a bond market standpoint is hosted through these websites, we can go directly to the actual, you know, area where this stuff gets posted and know that the bond market is actually improving today. So we just went under 4%, which hasn't happened in a while. We are at 3.98 as of this morning, which is helping put pressure on bringing those interest rates down. We also have at the end of the month the looming Fed cut that is pretty much 99% guaranteed to happen at the end of this month, with another cut coming in December. So we have some good news from that standpoint. It's a quick reminder: even if the Fed does cut interest rates, it isn't a direct correlation to mortgage interest rates being cut. However, they do fall along the same kind of trajectory, if you will. So normally when Fed cuts interest rates, that bond rate will go down, which helps mortgage interest rates come down. So a lot of things, good things still happening through the end of the year from an interest rate standpoint. Right now we're in the low six-ish range. The hope we can hit some fives with a little extra, little extra fee, a little extra buy down. But most of most people are going to be in between about six and six and a half as of today. So one of the things that has come up in really immense numbers over the past couple of weeks, at least for me personally from a mortgage application standpoint, is clients who are transitioning from retirement or from their jobs into retirement and wanting to make a move. So, for example, a lot of times I will have clients who say, hey, I'm going to retire next year. I want to come up with a plan where I can retire and move to Florida, or I can retire and move Derek, or I can move back to Minnesota to be with my grandkids, or whatever that case is. So I have a lot of people in transition right now that are nearing the end of the year, which is usually a retirement timeframe. And how do we successfully help them from working a full-time 40-hour week salary position to retirement and really figuring all that out and how that's going to work from a home purchase standpoint? So a couple of things that we look at. When we look at somebody that's transitioning from a full-time job into retirement, what does their retirement situation look like? We know that they haven't set up draws on their retirement income, or maybe they're just not wanting to for a while. Maybe they just want to live off of savings for a while. Well, there's a couple key transition pieces that we can do from a mortgage standpoint that can help them with that transition. First and foremost, we can do what's called an asset dissipation loan. So what an asset dissipation loan does is it takes the full amount of your assets and it dissipates them or it draws them down over time to cover the bills and the new mortgage amount. These loans are pretty common for people who are transitioning to retirement where maybe a bulk of their assets are held in either in non-retirement funds or they have kind of an even split 50-50 between retirement funds and assets. And we can do what's called an asset dissipation and just draw those funds down over time in order to qualify for a mortgage payment. So that's kind of a very useful tool. The other thing that we can do is we can have them set up a monthly distribution from a retirement account that is going to take place after retirement age. So, in other words, let's just say they're retiring in December, they want to purchase a home in January, we say, okay, no problem. Set up a retirement distribution to call in a qualifying amount for the mortgage and the loan, and then receive your first distribution and we close on the loan. What you do after that is up to you, however that works. But if we can set up a monthly distribution to cover the mortgage and qualify for the loan, then it write like they receive their first distribution, we can close on the loan two to three days later. So it's really nice opportunity for them to not have to have a history of retirement income, but be able to still transition into that retirement mode or into that new home while they're transitioning from a job into retirement. So those are two options. The third option that we look at is a child buying a home for a parent who is retired and cannot afford the home on their own. The requirement for this is that they have to be of retirement age and they have to be considered elderly, which ironically is anyone that is of retirement age. So if you are a child and you can say, okay, I can purchase this home, but I want to purchase it for my aging parent, you can do that and it's still considered a primary residence loan, 5% down payment, normal everyday interest rates. So those are three different big opportunities that we can have that can help people transition from working full-time into retirement without missing a beat.

SPEAKER_01: 5:50

Oh, that's amazing. Yes. I love it. Yes. And I know we're working on one right now. We are. I did not know that. So I misinformed her. But of course, I said you're gonna want to talk to Nikki because she has all of the tools and the resources and the programs, and she'll know better than me. And of course you do. Yes.

SPEAKER_00: 6:09

And the cool thing about the, you know, parent loan or the aging parent loan is that the whole design of that loan is really threefold. Number one, it's designed so that when you have an aging parent and as they come on and age, if they need to go to assisted living or nursing home, sometimes the assisted living or nursing home can require the client or require the parent to draw on the equity of their home in order to supplement pain for the nursing home for anything that Medicare and Medicaid don't cover. That can be a huge issue for, you know, parents who have bought a home, have a ton of equity, and that is their nest egg. That's what they need to live off of. That's what they wanted to leave to their children. So this loan allows the child to purchase the home for the parent as a primary residence and not and really not have to take that home into consideration when it comes to nursing home or assisted living requirements. The other cool thing is it allows us to put lower-down payments on a home, which, you know, can help with actual cash flow that the aging parent could or could not have. And number three, the only requirement is for us to state that the aging parent can't afford this home on their own. We don't have to collect medical records. We don't have to collect income information from the aging parent. We just have to state that reasonably this parent is aging and they just simply can't afford this loan on their own. So that's really what those requirements are. So it's a really useful tool that we've used quite a few times actually to help people transition into a different moment in their lives.

unknown: 7:35

Yeah.

SPEAKER_01: 7:36

No, it's absolutely there's so this just proves my point. I'm gonna say it again. There are so many programs out there. And I've been talking to a lot of new agents that have been joining me on coaching and mentoring. It does matter who you partner with. This is a perfect situation. You are not going to get Nikki's expertise, her time, care, and attention to your clients from someone online, from just going to like one of those online mortgage places. Maybe you get it through a click, or your client clicks it through one of the ads or something. I mean, they might get on the phone once or twice, but being specialized in Minnesota, like Nikki is in many other states as well, and staying up to date. I mean, God, please do not go with a lender who doesn't do this full time. Yes. And on top of full time, you have Nikki who's done this how many years is it now? Well, 26 now. Yeah, that's what I thought. Yes, I keep thinking again when we first started working together, that number sticks in my head, and I know it's been years. So 26 years.

SPEAKER_00: 8:44

26 years.

SPEAKER_01: 8:45

Yeah, yeah, it's so important, you guys. Who knows?

SPEAKER_00: 8:48

Maybe I'll get to use one of those retirement loans one day, you never know.

SPEAKER_01: 8:53

Yes, but yeah, no, I mean, and if you're getting no's, or if your buyers are stuck, or if you're not getting pre-approvals, or if there are programs that aren't yet available, or if the answer is anything but a yes, or we'll figure it out, you need to talk to Nikki. It is so, so very important. And if you're doing your fiduciary duties and really looking out for your buyers, I always tell my buyers in the beginning, you know what, let's get you with Nikki and then get a second or third opinion. I say go to your bank or your credit union or whatever financial institute you have, you know, if that makes you feel better, because a lot of people have that familiarity and they want to go there because that's where their money's been or where their banking's been, or if it's a smaller area, they probably know the people in their local bank or credit union by first name. So just take that into consideration. But if your buyer is insistent upon going through their bank or credit union, always, always, always send them to Nikki for a second opinion because that is our job is to consult and to um make sure that we're watching for the bet out for the best interest of our buyer. I always tell them my not script or line, but what I say is I don't care who you go with, whomever you choose is up to you. My role in my care is that you get the very best deal, interest rate, plan, you know, loan for you and your family. That's that's it. And you'll only, you know, you'll know if they've already gotten their credit, their credit pulled and gotten their terms and everything from their credit union or bank. I say one of two things will happen. Either you will know you're exactly where you should be, and you'll have peace or mind, peace of mind, or Nikki's gonna show you something that's gonna be far better than what you'll have, and you'll you'll have peace of mind that you save thousands of dollars. So either way, you win.

SPEAKER_00: 10:57

And I also very much so. And also when you as a realtor are looking for, you know, like you get a pre-approval letter. Let's say you have a listing and you get a pre-approval letter. If you have a loan officer on that pre-approval letter, I just hooked up the website. It's the NMLS Consumer Access website. You can plug in their license number, their name, their NMLS ID, whatever it is, and it'll search for them for that customer and it'll tell you what their history is, how long they've had their licensing, you know, what it looks like. And I'll just pull up mine just so you guys can kind of see what it looks like as far as how experienced, you know, you can see a person is. And any consumer can do this, any realtor can do this, any consumer can do this, and it just gives you an option for how you can see how, you know, how their history is. So for example, this list of all my licensing, all my, you know, information on where I've been, how long I've had a license with each individual, you know, each individual state, et cetera. And so it gives you a lot of these details. And you can kind of go in here and you can say, okay, well, Nikki, she's been, you know, you know, a long history of employment, 2003 is where I, when we were first required to get these NMLS IDs. This is my first NMLS ID. That was the first year we were required. So you know I've been in this business for quite some time, you know, working around the business and making sure that, you know, I've been able to carry my license through and have the experience of an experienced loan officer. So it'll give you the where they're licensed right now. And then if you just click on this, it'll tell you the history of where they've been. So a lot of times I'll get from from uh what I want to say, from other agents asking me, hey, you know, I'm just gonna stop share here. Hold on just one second here. They'll ask me, you know, like, do you know this person? Do you know, you know, who they are, whatever the case is. And I'll get them to ask me, hey, how long have they been licensed for? And this is the exact website that I go to every single time. So that's important for you guys on your listings as well is to look up these loan officers or for your buyers if they are considering someone in a bank or are considering someone, you know, outside of what you would norm who you would normally work with, do the due diligence to look them up and say, hey, this is great. I love that your friend Ben does mortgages. However, Ben's been in the mortgage industry for three months. And it might be good to get a second opinion because there's a lot of situations that can come up in mortgage where people are going to need alternate help. So just an FYI for you.

SPEAKER_01: 13:24

Yeah, you're you're the full deal. I mean, listing side is a listing agent. You get that pre-approval letter from the buyer's agent's buyer. Yeah, look up Nikki. I mean, that's that's even better. I mean, honestly, talk about holistic, well-rounded business partner. Again, she's an arm of your business for buyers and for listings. As you're getting those purchase agreements, you need to vet out those people.

SPEAKER_00: 13:51

So and give your sellers confidence too. Say, hey, I looked up this loan officer, they're well history. You know, they have eight years in the industry. Looks like you know, and by the way, you can also look up production numbers for loan officers. It takes a little bit more googling, but you can look up production numbers and see how much production they've done so that you can feel confident that even if they've been in the industry for eight years, oh, look, they've done 700 loans in eight years. That's amazing.

SPEAKER_01: 14:14

Things are so that's gonna be my tip for today. I mean, if you can do, I don't know of all the listing presentations I've watched, I don't know of one that I can think of off the top of my head that says, we will also vet the lender for your buyer of your home. I mean, bring that. That's my tip for you today. Find a business partner. If you're not working with Nikki, ask your lender if they'll do that for you as a listing agent and look up and vet any of the lenders for the buyer of your listings. That's huge. I love it.

SPEAKER_00: 14:49

It is, yeah. And it works, you know. Like I said, I've I've been able to talk to clients who have had experience with, you know, loan officers that don't have a lot of time or experience. I've talked with clients who have loan officers that are really good. And I'm also, I'm also the person that's like, I want to make sure that that client gets the best deal for themselves. If there's really no difference between myself and another loan officer and they feel comfortable with that other loan officer, I'll tell them, like, hey, this is good, this is a good deal, it looks great to me, or I'll say, hey, I can do a little bit more on this side, or here's another strategy I will employ, things of that nature. Because I'm here for the relationship and making sure that they get what they need from a purchase standpoint or from a loan standpoint. I'm not here to take loans from other loan officers or to take loans from banks. I'm here to make sure that they have the checks and balances that they need in order to get the information.

SPEAKER_01: 15:34

Yep, and be a the best business partner around. Yeah. So you're so so appreciated. Yeah, I can vouch for it. She's amazing. Wonderful. Well, I will take that link and I will drop it. So whether you're watching on social media, listening to the podcast or YouTube, look below in the comments and leave us a comment. If there's anything that you want us to cover or talk about, let us know. We'll be happy to do that. And always the Monday market update of what's happening in the now, because as you can see, this is live in the AWS thing is happening everywhere. I know I'm getting emails left and right. So it just shows that we don't pre-record this.

SPEAKER_00: 16:10

This is every every Monday. And yeah, hopefully our systems will be up by the end of the day.

SPEAKER_01: 16:16

Right, absolutely. Well, thanks, Nikki. We'll see you next week and uh appreciate you.

SPEAKER_00: 16:21

Absolutely. Talk to you guys later.

SPEAKER_01: 16:22

Have a good one.

SPEAKER_00: 16:23

Yeah.