Retiring: Easing Into Leisure, One Step at a Time

A growing number of Americans are downsizing and retiring in multiple steps, continuing to work at least part time and moving more than once.

Did they buy a home with cash, i.e., without financing it with a mortgage, like many cash buyers in California nowadays?

I am always wondering about this: If a person has retired, does not have a nice stream of annual income from a not-so-small pension or a significant asset which could generate sufficient income, who will lend him/her money to buy a house?

When a person is well-to-do, he could easily retire in multiple steps. But for somebody who has not done so well financially at the time he retires, how can he manage to move from one house to another? Do they replace one paid-off house with another paid-off house? This may be difficult if his house has not been paid off.

This was a true story: ages (35 years?) ago, one of my neighbors in the same apartment where I lived told me that the apartment manager was almost not willing to take him (and his wife) as tenant. The reason the apartment manager cited was that the company he worked for (National Semiconductor) had laid off too many their employees in that year and a few years before that year so his “credit” must not be great. (Maybe the apartment manager had been “burned” several times by ex-employees from that particular company. These days, the landlords owning the apartments seem to have more lenient policy - I saw well too many apartment units are occupied by too many inhabitants but the apartment manager “looks the other way” even though it must be against the rule. This is likely because many tenants belong to the same company who is the “true tenant” behind these tenants, i.e., these tenants may receive free housing in lieu of a part of their income from their company.)

How is the credit of an retiree evaluated?

They may move into a less expensive house than the one they move out of. Or they may move from an owned house to rental housing, or move from one rental to another.

Credit is based on payment history of loans (e.g. credit cards, mortgages). If the retiree has been paying an existing mortgage and/or credit cards over the years, then s/he will have credit history based on timeliness of such payments. Income is considered separately, in terms of whether it can cover the loan payments.

H retired in 12/2012. We were advised by several sources that we should get a HELOC while he still had a full-time job because some folks have difficulty getting one once they are retired. We have fully paid off our mortgage and have no debt, but the bank where we had our mortgage was running a special–NO costs, appraisal fees, no annual fee or anything associated with getting a HELOC, so we got one with no obligation and no annual fee. We have never used it and just get a statement quarterly showing that we still COULD draw on it at whatever time we choose.

We have gotten every credit card we have applied over the past 2 years except for one. I have a credit score over 800 but was denied one credit card because I don’t make enough income from my nonprofit. I didn’t really care and never bothered to contest the denial. I have gotten several CCs since with no problems. We have excellent credit and have never had problems making payments.

I’d suspect if a person doesn’t have much income, they will indeed have difficulty getting a mortgage or any credit, especially if they are older and relying on fixed income sources for repayment of debt. If one doesn’t have much income, one often ends up renting or trying to get subsidized housing rather than purchasing housing at market rates, at least in HI and other places I’ve heard about. Even if one is given a mortgage or loan to purchase housing, the purchaser will be responsible for maintenance that can be quite costly, as well as insurance, property taxes, and other incidences of ownership. If the person has a house, the person could use any equity generated from selling the home to purchase one that is affordable with the equity and whatever monthly payments could be made with monthly income–pension, social security, etch.

In the area where our house is located (we do not live there; we rent it out), we were told that since we own a house, the manager of an apartment would consider we are qualified to rent the apartment. There is no need for income verification.

Is this true in other area too (maybe the exceptions are the very high demand areas like San Francisco, New York City, San Jose/Santa Clara, etc.)