One of your primary questions will be if you want to continue to live where you currently reside. Many Baby Boomers, and even a good portion of Generation X Americans, are realizing they need to downgrade for the long run.
The home where they raised their kids is now too big for them, or maybe they have lots of stairs they will now have to cope with down the line, when it’s difficult to climb them. Maybe there is just too big of a yard to maintain, or simply, a lot of retirees want to move somewhere warmer.
With this in mind, retirees also want to hang onto as much of that hard saved money as possible. This will leave some either moving into a small apartment, or maybe moving in with their children. Some even settle into retirement communities, but there is often a stigma attached that these “independent living” places are ones you move into when you’re unable to care for yourself.
There are quite a few options that retirees have in order to keep their independence at surprisingly low costs. Retirees will want to check out this helpful list of resources.
Get a Condo or Small Home Anywhere
Whether you want a single-family home with a small yard and no stairs, or a condo with elevators and upkeep taken care of by others, an FHA home loan will be a great option. This is a home loan that is guaranteed by the U.S. Department of Housing and Urban Development. Benefits include low interest rates and a low down payment. You could be eligible for approval with a fair credit score of 620 (as low as a poor credit score of 580 in Florida or California).
Also, if you are able to pay more than a 22 percent down payment on your chosen property if you choose a loan term under 15 years, you will not have to pay mortgage insurance on your new home. This is much more interest you will be saving to spend on other fun retirement activities.
If you want more input on the FHA home loan, call us at 877-432-5626, or use the chat tool on this site to speak with a representative.
Modest Home in the Country
If you want a quiet retirement in rural America or a home in a suburb that can be as close by as 45 minutes to a big city, you should look into a USDA home loan. This program is specifically for those who want a single-family, modest home in a USDA-approved area. The only catch here is that if your credit score is not considered low, you have no issue being financed for a conventional loan, and you are not classified in the low income bracket, you likely will not be approved for this loan.
The USDA also has grants for those over age 62 who already live in a single-family home in a designated rural area. These grants help make homes more energy efficient, to remove hazards, and to adapt a home if your physical abilities have drastically changed. You do not need to have a USDA-home-loan-funded property to qualify for this loan.
If you want further details on the USDA home loan, call 877-432-5626, or chat with a representative on this site.
The Unlimited VA Home Loan
If you are a veteran, you likely have already heard of or used your VA home loan for your current home. Did you know it’s a benefit you can use over and over again?
The VA does not put a cap on how many times the VA home loan can be used. Even if you have used the loan on your current home, you can use the benefit again to find your retirement home. Veterans and surviving spouses qualify for this loan, under surprisingly basic guidelines.
Change of Address
You must be aware that with a federal home loan, the retirement property will have to be your permanent, full-time residence, as you must sign paperwork stating intent to occupy the home. If one were say, a retiree moving from Massachusetts to Florida, I’m sure they would be happy to make their permanent home somewhere without snowy winters.
Save Money Owning Property with Federal Home Loan
Rental costs are going up around the country. Let’s say your rent is $1,200 a month to move into an apartment with lots of amenities or a retirement living complex that charges this amount monthly. It will cost you $14,400 a year to live here, not including groceries or other costs.
Putting aside annual rent increases, if your rent stayed at this rate, let’s multiply that by 30 years of retirement. You will be paying $432,000 for rent during your retirement.
Now, let’s say you want a $200,000 property and you want to pay it off in 15 years – a big condo, a modest home close to your kids, or a small home in a retirement community. With a 3.75 percent interest rate for an FHA, USDA or VA home loan, your principle payment will be around $1,400 plus taxes, funding fee, and mortgage insurance, where applicable.
Though this is more expensive than the cost of the earlier mentioned apartment, you will be done paying for this home after 15 years have passed, whereas the rent is a constant cost. Subtracting the amount of your home loan after interest at a round figure of $261,800 from the long-term apartment cost $432,000 will leave you with over $170,000 extra for other retirement expenses.
With the conventional home loan, interest rates will typically be higher than a federal home loan. This is also something to consider when wanting to save money in this process. You will also continue to pay mortgage insurance on the conventional loan until you reach 80 percent LTV (loan-to-value ratio) or have 20 percent or more of a down payment.
If you want more information on any of these federal home loan programs, or you want to find your retirement home, please fill out an application on our site or call us at 877-432-5626. We also welcome you to tweet us @FedHomeLoan.