You’ve decided to sell your Nashville home and move to something smaller or to another town. As a homeowner, you naturally think of buying again — a smaller home, or maybe a single-level condo. But should you? Maybe you should rent instead. It’s an age-old dilemma among retirees. And for good reason!

buying a home when retiredOwnership is solidly entrenched among retirees. They weren’t even shaken by the real estate collapse. From the peak of the housing bubble in 2006 to the present, the rate of home ownership for people 65 and up has held steady at about 80%, according to the Census Bureau. That same statistic is over 90% among married couples in which one person is 65 or older.

Mortgages After Retirement

Federal housing laws prohibit discrimination on the basis of age, so retirement is no barrier to obtaining a home loan. Mortgage lenders care about the borrowers’ ability to repay their home loans more than anything else. When retired people and couples apply for home loans, however, the requirement for income verification may be a bit more stringent. Typically, retired income useful for home loan qualification consists of Social Security benefits, individual retirement accounts, 401(k) distributions and annuity payments.

Retirement Income Length

Each mortgage lender has its own specific income guidelines for loaning to retired people and couples. However, the general requirement for considering retirement income on home loans is that it must continue for at least three years. For example, any retirement annuity payments you’re receiving can be counted as income on a home loan if they’re continuing for three years. Unfortunately, mortgage lenders usually discount retirement income they consider “temporary,” or lasting less than three years.

Always Crunch the Numbers

Here’s where the sharpest of pencils comes in. Estimate your retirement budget with and without the home purchase. Where will the money come from to pay your housing expenses? Rents will go up (about 3 percent, currently) but, for homeowners, so will insurance, taxes and upkeep costs. If you can pay cash for a house or condo and still have plenty of money to live on, you’re a good candidate for buying. But if home owning strains your lifestyle — even if you conserve cash by taking a new mortgage — you’re a candidate for renting.

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