Personal Finance & Money Asked by neubert on May 10, 2021
My 69yo mother is looking to buy a new house (and sell her current one). Based on what she’s expecting to get for her current house, how much she still owes on her current house and how much a new house would cost she’s seeking a $100k mortgage.
When I got my mortgage I was asked for two years of tax statements, two months of paycheck stubs and for how long I had been employed at my current employer. For someone my age (~30yo) this makes sense to me as it doesn’t seem unreasonable to assume that past earnings and job stability can be an indicator of future earnings and job stability. This notion is somewhat similar to the Lindy effect.
What doesn’t make as much sense to me is why my 69yo mother would be asked for this stuff. Her retirement is imminent. She’s been at her current job for almost 40 years but her income situation vastly changes on retirement and I don’t see how you could make any make any inferences from what her post-retirement income will be like based on her pre-retirement income for, at best, the past two years.
What seems more relevant to me for her is: Does she have a pension and/or a 401K / IRA, etc. But that’s what they’re asking about.
I guess her social security income can be determined from her last two 1040’s but one would hope that would be chump change compared to her pension and/or 401K / IRA.
My question is… why aren’t they asking about these things? Why are they asking for income documentation that seems completely irrelevant to her situation?
Because the mortgage company doesn't care about your mother as an individual. They have a certain set of (probably automated) bureaucratic procedures that they go through for everyone that fits particular criteria. At the moment, your mother fits the "employed with W2 income" set of procedures, so she gets to provide those paycheck stubs and tax returns. There's probably another set for "retired and collecting Social Security" applicants, which would be invoked if she'd waited until after she actually started collecting SS to apply.
She should really consider herself lucky, though, because it's likely to be easy to get approved for that relatively small mortgage, with presumably a small loan-to-value ratio. She could be self-employed, or living off investments, either of which makes getting a mortgage much more difficult - been there, done that :-(
PS: FTM, how is the mortgage company supposed to know that your mother intends to retire in the near future? Not everyone chooses to retire just because they've reached a certain age. Indeed, mortgage lenders can't legally discriminate on age, so they may not even know her age.
Answered by jamesqf on May 10, 2021
The documentation requested seems standard for all borrowers; the mortgage company's requested documents list is probably the same for all borrowers with that type of loan request.
You didn't mention the loan-to-value - maybe it is low enough where they don't need to delve deeper into your mom's financials past the standard documents?
Also, using non-creditworthiness factors like age can appear discriminatory if not documented properly, https://www.consumer.ftc.gov/articles/0347-your-equal-credit-opportunity-rights. At 69, additional info about retirement makes sense, but for a 100K, it may not be worth the extra time.
Answered by chistack on May 10, 2021
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