Lender question: no money down options for senior citizen?

13 Replies

I have a client who's retired on social security with $1400 a month. He has a $250 mortgage payment on his current home. But not really any other debt, drives an old toyota, that type of guy. If they wanted to purchase a newer nicer home for say 200k, and they have a cosigner son who makes 70,000/year. Do you think there are options to do no money down loans for financing it? My client wants to keep his current home and rent it out after moving out. 

Originally posted by @Ben Magee :

I have a client who's retired on social security with $1400 a month. He has a $250 mortgage payment on his current home. But not really any other debt, drives an old toyota, that type of guy. If they wanted to purchase a newer nicer home for say 200k, and they have a cosigner son who makes 70,000/year. Do you think there are options to do no money down loans for financing it? My client wants to keep his current home and rent it out after moving out. 

The bank will look at both incomes if they are both going to live in the house, otherwise it is an investment property. 

Try a credit union, they tend to be a bit more flexible. A borrower can not be turned down because of age. Income, credit score, amount borrowed, intended use for the property and on and on all do matter.

It can be done as a conventional primary residence loan since the son is purchasing it as his dad's primary residence but I'm not optimistic about a no money down program. Unless they can get really lucky with a grant/down payment assistance or purchase the property in a USDA zone. 

There are down payment assistance loan programs that allow a non-occupant co-borrower. I would look toward those programs. 

@Ben Magee

Yes, there are ways.  Find a mortgage broker who knows the guidelines and how to do this.  The easiest way is to avoid DPA programs and have someone, maybe his son, gift him the funds for down payment and closing costs.  Another way is if you can find a seller who is willing to gift equity.  Its a paper transaction and simple to execute.

Cheers!

@Jeff Shumway , thanks for the input.  What do you think is minimum down payment percentage if no money down didn't work? Alternatively, on your comment about Down payment assistance programs, if this is for Western NC, who would you recommend trying to reach out to to get more specifics? Or to see if they would want to buy in a USDA zone if there is one nearby enough?  

It is for the dad to owner occupy. The son would not occupy. Their thing is they would buy if they don't have to put up substantial cash for a down payment, so was trying to see if I can provide a way. 

Down payment assistance specifically for senior citizens sounds like age discrimination to me, personally. Just wanted to out that out there, but who knows - I don't know what every lender in the country is doing.

USDA loans are 0% down payment, with excellent mortgage insurance compared to FHA and Conventional (unless you put more than 15% down). There are income restrictions which count the entire household (not just the borrowers) and geographic limits (you can just Google "USDA coverage map" to see if your area is eligible).

Another perk that is unique to USDA is that the financing amount goes off of the appraised value, not the purchase price. So if you buy a house for 200k and it appraises for 205k, you can finance 205k to pay for the closing costs :)

Judging by the fact that you said "nicer, newer place for 200k" I'm guessing you're not in a large metropolitan area, so my guess is that you should be good - but you should definitely check the coverage map to be certain

@Ben Magee I'm sorry, I just noticed your last sentance. It would be tricky to get a USDA loan while retaining the current home, at least if you're trying to use departure residence income to qualify.

I made a video about this recently.

https://youtu.be/iZ1OMKWfjFg

If he can qualify for both loans without rental income, then you shouldn't have a problem. It only becomes a pain in the butt when you try to use rental income.

Also, I'd have to double check the guidelines but I'm about 87% positive, that you can't have a non-occupant Co-borrower for USDA. So the son couldn't be on the loan with him.

@Sam Fickel I checked out your youtube video, loved the professional style, and captions below. Some great stuff. From talking to people on here, I did meet with the local credit union, they said they would do 10% down and consider it a second home. That's an option but not one the senior citizen client was excited about. 

Seems like USDA would be good. Though, at $1400 / month income on social security, and $250 a month debt in his current home he wishes to keep. He'll have paid off his current home in 8 years. To stay that the 40 % debt to income ratio, my client can only afford a $300 monthly payment which probably isn't really possible unless he wants to go further out and pay 85,000 for a rural small home. 

So maybe if I can work with a broker to find 

a) a program that accepts non occupant cosigner 

b) some down payment assistance 

thanks for the help. 

@Ben Magee it's not a lender call, it's an agency call - otherwise, you'll have to go non-qm or do some creative financing to make it happen. It's tough when you don't have a down payment.

And yes, you need 10% down for conventional 2nd homes.