The Challenge of Home Mortgages for LGBTQ Seniors

The most important step to buying a new home is to get the financing necessary to pay for it. A mortgage is a rite of passage where the first-time home buyer goes through a test of ensuring you can afford a home.

For LGBTQ seniors, they have experience dealing with mortgages. Whether they have paid off their first one or are working through the latest one on their new home, the process may be familiar to seasoned homeowners.

Or, is it? We asked Bob Austin, a Mortgage banker at Alerus in Minnetonka to give us his take on the financing side of home buying and selling for LGBTQ seniors.

In regards to the current market, Austin also reports that “there really isn’t any risk special to the LGBTQ senior in the current market, however, there may be some surprise at what the current interest rate may be. Most retiring seniors haven’t had a mortgage in a long time or they most likely refinanced to rates in the lower 3’s or even the 2’s. With interest rates hovering around 6%, that could be quite the surprise.”

In fact, mortgage rates continue to rise. The latest figures show rates now closing in on 7%.

If you’re the one selling your current home, “one thing to keep in mind when selling is that there will generally be cost involved as a seller,” explains Austin. “This cost may impact your net proceeds from the sale of their departure property.”

Austin further explains that “[a] general rule of thumb is to take 92% of the sale price as the amount of proceeds you would get from the sale of the home. Then, reduce that amount by any mortgages that you have on the property. So if you sold your home for $400,000, you would receive approximately $368,000 from that sale. If you still owe $200,000 on that property, you would net $168,000. This $168,000 could then be used for your down payment and closing cost on the purchase of the new property. The best way to determine what your net proceeds would be is to ask your Realtor to complete what is called a Net Sheet.”

At this point, you already found your next home. However, Austin points out that “Seniors tend to prefer buying a new property before selling their departure property, as they may feel more secure knowing where they will live before selling their home. This could pose a problem if they don’t have significant funds for a down payment and closing cost.”

“Generally,” Austin explains, “seniors may have paid off or paid down their mortgage to a level that provides them with a lot of equity and if this is the case, they may be able to use a bridge loan for the down payment and closing cost on the new purchase. A bridge loan is a loan on the departure property and is paid back when the property sells.”

Another point Austin makes is regarding home buyers who have since retired from work. “If applying for a mortgage to purchase as retired person,” explained Austin, “you would need to have a consistent income. Social Security income and retirement/pension income can be used for qualifying for a loan, but it may be less than what someone was making prior to retiring. So it’s a good idea to get pre-approved to determine if the income is sufficient qualify for the loan.”

Austin continues that, sometimes, “pension income may not be enough, but increasing the distribution from the pension plan may work just fine. For social security income, you would want to have the set up and have a benefits award letter showing the amount of the monthly income.”

When you are ready to switch homes, get a good mortgage banker to guide you through the process. This alone will make your home shopping process much easier – especially for us LGBTQ Seniors!