If you are shopping for a home for retirement, it helps to know what mistakes to avoid so that you can save money and choose a home that will be ideal for your needs over the years to come.
Mistakes to Avoid When Buying a Home for Retirement
Below are some common pitfalls that retirees and soon-to-be-retirees can fall into when buying a home.
- Don’t mistake the ideal in your head for reality. Retirement is a time to live your dreams, and you should shop for a dream home if you can afford it. But it is important to make sure that the reality of the home you buy will match your dreams. For example, you might love the idea of moving into a big rural fixer upper. But how will you feel about the reality? It could be more effort and expense then you are bargaining for. So, try to be realistic and think about the potential benefits and drawbacks of what you have in mind and how they could play out in real life. Sometimes, a halfway point between your imaginary ideal and something less involved might be more suitable. For example, instead of a huge fixer-upper in the country, you could aim for a smaller home that requires less work, but still is in a lovely rural or small-town setting.
- Don’t buy a home without thinking about lifestyle needs. Just as future retirees sometimes get in over their heads, they also commonly make the mistake of forgetting to visualize what they want their daily lifestyle to be like. Maybe you want to live in a luxurious house, but you also want to be able to go on vacations twice a year. Have you thought about how that will play out when it comes to your budget? If you purchase the expensive home before doing the math, you might discover that you can no longer afford all those vacations and cannot enjoy the lifestyle you really want. Decide what is most important to you when it comes to lifestyle, and then calculate a budget from there to figure out how much home you can afford in retirement.
- Don’t let your credit score drop going into retirement. When you apply for a mortgage in retirement, you are evaluated for the same metrics that you would be in the workforce, including your income, credit score and debt-to-income (DTI) ratio. So, if you are not going to apply until you have actually quit the workforce, it is extra important to keep your credit score high since your income will probably be lower. If you allow your credit score to fall, you will have a harder time qualifying for a mortgage.
- Don’t forget to factor all costs into your budgeting. When calculating what you can afford in retirement, you might just think about the monthly payment that you will make on your mortgage. But it is a mistake to forget that there are other costs associated with owning a home. Some of these additional costs include taxes and possible homeowner’s association fees. Mortgage insurance might also be a requirement depending on your qualifications and the type of home loan you end up taking out.
- Don’t stretch your budget too far. When you are shopping for a home for retirement, it could be your last shot at getting your dream home. As such, you might be tempted to stretch your budget as far as possible to accommodate special features that you have always dreamed about. You also might be tempted to try and pay off your mortgage as rapidly as possible to save money. So, you may be thinking about selecting a relatively short loan term. But it is important to think about what it would be like to just barely be able to budget your home ownership costs along with your other costs of living during retirement. It may not be worth the day-to-day stress.
First Residential Mortgage Can Help You Buy a Home for Retirement with an Affordable Loan
The loan experts at First Residential Mortgage have worked with many retired and soon-to-be retired homebuyers and homeowners.
We can help you calculate how much home you can afford and what the impact will be of different mortgage terms during retirement.
We can also walk you through the process of qualifying for a home loan in Virginia after leaving the workforce and can connect you with a loan that is ideal for your needs.
To get started, please call (540) 838-5868 to schedule your consultation.