Qualifying for Mortgage Without “Income”

Phoenix Arizona Assets as Income Mortgage

Once upon a time, in a land far far away there lived a Phoenix mortgage program named “stated income.”  He roamed the Arizona Real Estate market spreading mortgage bliss (or so everyone thought) to every soul that had a pulse.  Oh who am I kidding, you don’t need to hear this story.  We all know how it ends!

The lingering problem with this story’s ending is that when stated income was retired out the baby went with the bath water.  There was a legitimate use and appropriate application for certain Phoenix Arizona home-buyers with regard to stated income mortgages (certain self-employed borrowers, retiree’s that pulled income from their retirement funds etc…).  The next best thing that is available today is a program dubbed the “‘assets as income” loan or more technically “Fannie Mae’s assets as Income Variance.”

An Alternative to Stated Income

The assets as income program allows individuals that live off of an asset base and who have no regular income to essentially translate their asset base into an income figure so they may qualify for an Arizona mortgage.  Let’s face it, as of today there is no way to obtain a conventional, FHA or VA home loan unless a Phoenix area home buyer can document income.  The assets as income variance is a Conventional mortgage program at heart that allows us to stretch traditional mortgage rules just a bit while still staying in the mortgage boundaries that have become noticeably narrower recently.

How Does an Assets as Income Home Loan Work?

The program is designed for retirees OR clients that do not have any source of income besides their asset base.   These types of buyer’s can qualify by setting up a formal distribution plan from their asset base.  Essentially an Arizona buyer needs to work with their financial adviser to initiate a regular stream of income to be distributed directly to them on a monthly basis.  There are a few guidelines that one must meet in order to be eligible for the Assets as Income program:

1. This loan is only for purchase and rate/term refinance mortgages
2. The formal distribution plan must be set up and 2 months distributions must be documented prior to closing the new mortgage
3. The asset account that is being used must have enough funds available in it to support a 3 year continuance of the monthly distribution that was set up (example: if the monthly distribution is to be $3,000 per month, the asset account that funds will be distributed from must have a balance of at least $3,000 x’s 36 = $108,000)
4. Borrower must be either retired or living completely off of their asset base

Example of Assets of Income Home Loan

Let’s imagine we have a buyer that is looking to purchase a home in Sun Lakes, Arizona.  We will call them Joe and Sue.  They are retired, have no pension income and they also have no Social Security income.  They do however have $400,000 saved in a retirement account that they withdraw from as needed to cover life’s expenses and an occasional round of golf.  They do not have any formal distribution plan set up as they just contact their financial planner when they need funds.

Joe and Sue want to buy a home.   They know they have enough funds to cover the cost of a mortgage each month for a home purchase in the wonderful 85248 zip code.   In fact, they have mulled this over with their financial planner and buying a house is not only a want for Joe and Sue but it is also a savvy financial move.  The financial adviser suggests they obtain a mortgage to purchase the home.   Joe and Sue confidently walk into the Arizona mortgage lender’s office and apply for a loan only to be shot down because they have “no income.”  That is when the call me!

I connect with Joe and Sue’s Arizona financial planner to set up a formal distribution plan from their $400,000 asset account.  We determine that $3,000 per month in income is sufficient to get them approved for a home loan.   Here is what happens next in order to make sure we can get Joe and Sue approved for a Phoenix area Conventional mortgage:

1. Set up a distribution plan to have $3,000 per month transferred from the $400,000 asset account into a checking or savings account for Joe and Sue – we set the first distribution up as soon as possible pre the financial planner’s procedures/guidelines.
2. Joe and Sue’s financial planner drafts a letter stating what account funds are coming from, where they are going, how much is being transferred, how often it is being transferred etc…
3. As soon as me Joe and Sue’s Arizona Mortgage Lender documents that they have received the distribution for 2 months we can close on their new Sun Lakes Mortgage!

This program has helped countless clients of mine that otherwise would not have the ability to obtain mortgage approval from  an Arizona mortgage lender.  Please call or email me today if you have any questions.

You can also APPLY NOW.

By Jeremy House

Comments

  1. Love this new Option~ Especially for the competitive current market that we are in. It would be a HUGE bonus to close with Cash~ win the current “bidding war” that is happening, and then still go ahead and finance after. Thanks for this option, Jeremy! You Rock! : )

  2. Looking to sell home on one ac. Lot wanting larger 5-6 bedroom no hoa

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  1. […] a borrower is retired, their lender may be able to also give them income credit based on the amount of money they have in retirement investments even if they have not been pulling […]

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