For some people that I come across who want to buy a house I just flat out tell them to keep renting. Well, I also add some suggestions about a plan they could take, like save some money with a Roth IRA for example, to get themselves into a position of buying a house in the future.
At least with a Roth IRA they can do themselves some good with saving money for their retirement. Heck, if they wait long enough to buy a home (5 years) and contribute to a Roth IRA the whole time they wait then they can access some of that Roth IRA money, if they are a first time buyer, to buy a home.
I tell my clients that don’t quite cut it for a mortgage that Roth IRA eligibility is far easier than mortgage eligibility. To qualify for a Roth IRA, you need to open an account and be making money from a job in the form of wages, a salary, job-related profit sharing, sales commission(s), insurance premiums, tips and bonuses. Of course for tips and any income that you use to qualify – you will need to claim it on your tax return.
Proving your income is about the only similarity between Roth IRA eligibility and mortgage eligibility. In order to qualify for a mortgage you will definitely have to prove that you receive steady and predictable income. The guidelines around income for a mortgage a pretty broad and cover a lot of territory. Essentially a mortgage underwriter is going to look for steady employment over the past two years and be able to safely assume that your income stream has a likelihood of continuing over the next three years. The assumption here is that if you are salaried or work for hourly wages then it is likely that your income can and will continue into the future.
I’ll stop here with my eligibility qualification between the Roth IRA and mortgages since there isn’t more to compare.
All I can offer is that if you want to open a Roth IRA you should talk to a financial planner or tax professional to get some direction. Certainly if you don’t qualify for a mortgage the very next best thing you could do for yourself is to open a Roth IRA account and start working on improving your immediate and future financial picture.
