Purchasing A Chicago Luxury Home When You’re A High Net Worth Retiree

As we continue to see more and more enticing loan offers from banks, wealthy buyers are more and more considering taking out a jumbo loan to buy a luxury home. Even with the cash or assets to purchase a home outright, many luxury buyers are opting to take out a jumbo loan instead of spending or liquidating their assets; especially considering low interest rates and other various incentives offered by banks to jumbo borrowers.

But applying for a mortgage can be complicated enough, and for those who are retired, the process can be especially tricky. Having a high net worth but no “traditional” income can prove difficult to prove to a bank that you’re a qualified candidate for a mortgage, as recently highlighted by the Wall St. Journal.

As with many home-buying tasks, the key is to plan ahead. If you’re looking at a high net worth as a retiree, that likely means years of smart investing and savings, and the portfolio to show for it. It’s a matter of lining up your documentation and reporting assets in a way that is considered eligible income for a home purchase.

Here are 4 important considerations for retirees looking to obtain a mortgage for a Chicago luxury home purchase:

The standard rules apply: Retirees still must meet a 43% debt-to-income ratio mandated by federal mortgage rules. This is where it’s important to work with a lender who can help you report your assets to be considered eligible income. You’ll also still need a strong credit score, despite your net worth. And if you’re planning to hold the home and mortgage in a trust, it’s still necessary to demonstrate your ability to repay the loan.

Have your paperwork in order: Tax returns, bank statements, documentation of social security payments, IRA distributions and the like–any and all of these will be needed to demonstrate your financial health, and those documents should also show that your sources will continue to provide income for at least 3 years into the future.

Work with a financial adviser: An adviser can look at your entire portfolio upfront and inform you if it makes more sense financially for you to take out a mortgage or pay cash for a Chicago luxury home. An adviser can also help you calculate distributions from retirement accounts that could be helpful in qualifying for a loan.

Consider capital gains: If you’re thinking of cashing out your investments, be sure to calculate any lost returns, but also any potential capital gains tax hits to ensure you won’t end up losing money in the end.

I’ve helped many of my clients connect with lending experts who can help you assess your own situation and weigh the pros and cons of taking out a jumbo mortgage. Those who are retired should definitely do their due diligence to determine their options, and I would be happy to help you get the process started. Contact me at (312) 498-5080 or email me at ssalnick@dreamtown.com.

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