You might be surprised at how mortgage lenders rate older borrowers, whether you’re looking for help financing the Victorian fixer-upper of your dreams, unlocking the value of the house you’ve lived in for years, or taking advantage of rates that are still at almost historic lows.
• Age doesn’t matter. Despite what might seem counterintuitive, lenders see your loan application for a mortgage to be repaid over 30 years the same way whether you are 40 or 90 years old. A plethora of federal civil rights statutes, such as the Fair Housing Act and the Equal Credit Opportunity Act, forbid creditors from treating an adult differently based only on their age.
• Being debt-free may pose a problem. Chief financial analyst at Bankrate Greg McBride notes that if you haven’t recently had debt, one unexpected obstacle may be the fact that you don’t have a credit rating. “It used to be that you looked to retire debt-free. Even though you may have excellent credit history, if you’ve paid off your mortgage and car loan and are no longer in the credit game, there won’t be any recent activity to affect your score. Debit cards don’t count. One of the purposes of using a credit card is to maintain active credit lines in order to demonstrate a current credit history, even if you pay it off in full each month. ” A strong credit score can mean you’ll be approved with a better borrowing rate.
• Retirement income is still income. Mortgage applications usually start with questions about income to document how you will make monthly payments. Retirees can submit a Social Security or pension award letter in lieu of the employed person’s pay stub and W-2. According to Bill Banfield, executive vice president of Capital Markets at Quicken Loans, your income sources have no bearing on how much debt you can carry—unlike your credit score. He states, “We don’t have different guidelines based on profession or employment.” The secondary mortgage market is primarily regulated by Fannie Mae and Freddie Mac, who set the standards. Typically, these agencies mandate that monthly housing and debt payments (which include homeowner’s insurance and real estate taxes) not exceed 50% of monthly income.
• Your savings can work as income. The wealthy are served by specialized mortgage lenders who are frequently connected to stockbrokers such as Merrill Lynch and JP Morgan. They offer different approaches to underwriting some of the same types of mortgages, with terms ranging from 15 to 30 years. If you have investments, ask the firm where they are held about mortgages. For example, the Asset Pro-Forma Method at Morgan Stanley Private Bank allows you to attribute income from investment accounts to your wealth, which can help you get approved for a mortgage even if you don’t have any income. For example, the equivalent annual income of $35,000 for a million-dollar investment account with stocks and bonds (assuming 5 percent of annual income, after a conservative 30 percent discount for market risk) could normally be computed. The investments are only meant to show that the borrower has the financial wherewithal to pay the mortgage; they are not necessary for the borrower to cash in. Another industry term for this kind of loan is “asset depletion mortgage. ”.
In actuality, these presumptions are more cautious than the guidelines set forth by Freddie Mac and Fannie Mae, which are also followed by mortgage lenders nationwide. The same million-dollar investment account—retirement savings in an IRA or 401(k)—may be eligible under the Fannie and Freddie regulations for a “three-year continuance of income.” This calculation shows that the million-dollar account, split over three years, is equal to $233,333 in annual income ($1,000,000 less a 30% market-risk discount, split over three years).
• You don’t need to put down 20 percent. “The myth is still out there,” says Quicken’s Banfield. “But Fannie and Freddie programs allow for mortgages that are 97 percent of a home purchase. FHA mortgages go to 96. 5 percent. The Veterans Administration will do 100 percent. ”.
• Reverse mortgages can be legit. Boomers have, on average, just over $125,000 in home equity, according to Svenja Gudell, chief economist of Zillow. They can be a lifeline for retirees who must use home equity for living expenses. ” A “cash out” mortgage or home equity line of credit can also tap this value. However, unlike a normal 15- or 30-year mortgage, the reverse mortgage loan compounds, with the growing balance due when the borrower moves out or passes away. “Bad actors have given reverse mortgages a bad name,” says Bankrate’s McBride, “but the product is sound. ” Borrowers must be at least 62 years old and are required to go through reverse mortgage counseling. One Reverse Mortgage from Quicken Loans is among the companies that provide Home Equity Conversion Mortgages (HECM) via the Federal Housing Administration. CEO Gregg Smith says, “the home should be a key asset in planning for retirement. ”.
The question of whether you can get a 30-year mortgage at age 45 has sparked numerous discussions and concerns. While some believe it’s a viable option, others express doubts about its feasibility. Let’s delve into the intricacies of this topic and explore the factors that influence your eligibility for a 30-year mortgage at age 45.
Understanding the Age Limit for Mortgages:
It’s important to note that there’s no universal age limit for obtaining a mortgage However, most lenders have internal guidelines that restrict the maximum loan term based on the borrower’s age at the time of loan maturity. This is primarily driven by the desire to mitigate risk and ensure the borrower has sufficient time to repay the loan before reaching retirement age.
Factors Affecting Eligibility:
While age is a significant factor, several other aspects influence your eligibility for a 30-year mortgage at age 45. These include:
- Credit Score: A high credit score demonstrates your creditworthiness and increases your chances of approval.
- Debt-to-Income Ratio (DTI): This ratio measures your monthly debt payments against your gross income. A lower DTI indicates a stronger ability to repay the mortgage.
- Down Payment: A larger down payment reduces the loan amount and demonstrates your financial commitment.
- Employment History and Income Stability: A stable employment history and consistent income provide reassurance to lenders.
- Property Type and Location: The type and location of the property you’re purchasing can impact your eligibility.
Strategies to Increase Your Chances:
If you’re 45 years old and hoping to get a 30-year mortgage, think about using these tactics to increase your chances:
- Boost Your Credit Score: Pay down existing debts, avoid opening new credit accounts, and make timely payments to improve your credit score.
- Reduce Your DTI: Pay off high-interest debts and consider increasing your income to lower your DTI.
- Make a Larger Down Payment: Aim for a down payment of at least 20% to reduce the loan amount and demonstrate financial stability.
- Choose a Stable Job and Income: Maintain a consistent employment history and avoid job hopping to ensure income stability.
- Consider a Co-Signer: If you have a younger co-signer with a good credit score and income, it can strengthen your application.
Alternatives to Consider:
If you’re 45 years old and not sure if you qualify for a 30-year mortgage, consider these other options:
- Shorter Loan Term: Opt for a shorter loan term like 15 or 20 years to reduce the overall interest paid.
- Home Equity Line of Credit (HELOC): A HELOC provides access to funds as needed, offering flexibility and potentially lower interest rates.
- Reverse Mortgage: For seniors aged 62 and above, a reverse mortgage allows accessing home equity without monthly payments.
The Bottom Line:
It is possible to get a 30-year mortgage at age 45, but it takes careful preparation and fulfillment of certain requirements. You can raise your chances of receiving this kind of loan by being aware of the elements that affect eligibility and putting strategies into place to increase your chances. But it’s important to assess the benefits and drawbacks and think about other options that might be more suitable for your financial circumstances and retirement objectives.
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If you’re buying or refinancing, the answer may surprise you
You might be surprised at how mortgage lenders rate older borrowers, whether you’re looking for help financing the Victorian fixer-upper of your dreams, unlocking the value of the house you’ve lived in for years, or taking advantage of rates that are still at almost historic lows.
• Age doesn’t matter. Despite what might seem counterintuitive, lenders see your loan application for a mortgage to be repaid over 30 years the same way whether you are 40 or 90 years old. A plethora of federal civil rights statutes, such as the Fair Housing Act and the Equal Credit Opportunity Act, forbid creditors from treating an adult differently based only on their age.
• Being debt-free may pose a problem. Greg McBride, chief financial analyst at Bankrate, says an unexpected stumbling block can be that you don’t have a credit rating if you haven’t recently been in debt. “It used to be that you looked to retire debt-free. You may have a great credit history, but if you’re out of the credit game now—debit cards don’t count, and you’ve paid off your car loan, you’ve paid off your mortgage—there’s no recent activity to give you a score. It’s one of the reasons to use a credit card even if you pay it off completely each month, just so you have active credit lines to show a current credit history.” A strong credit score can mean you’ll be approved with a better borrowing rate.
• Retirement income is still income. Mortgage applications usually start with questions about income to document how you will make monthly payments. Retirees can submit a Social Security or pension award letter in lieu of the employed person’s pay stub and W-2. According to Bill Banfield, executive vice president of Capital Markets at Quicken Loans, your income sources have no bearing on how much debt you can carry—unlike your credit score. He states, “We don’t have different guidelines based on profession or employment.” The secondary mortgage market is primarily regulated by Fannie Mae and Freddie Mac, who set the standards. Typically, these agencies mandate that monthly housing and debt payments (which include homeowner’s insurance and real estate taxes) not exceed 50% of monthly income.
• Your savings can work as income. The wealthy are served by specialized mortgage lenders who are frequently connected to stockbrokers such as Merrill Lynch and JP Morgan. They offer different approaches to underwriting some of the same types of mortgages, with terms ranging from 15 to 30 years. If you have investments, ask the firm where they are held about mortgages. For example, the Asset Pro-Forma Method at Morgan Stanley Private Bank allows you to attribute income from investment accounts to your wealth, which can help you get approved for a mortgage even if you don’t have any income. For example, the equivalent annual income of $35,000 for a million-dollar investment account with stocks and bonds (assuming 5 percent of annual income, after a conservative 30 percent discount for market risk) could normally be computed. The investments are only meant to show that the borrower has the financial wherewithal to pay the mortgage; they are not necessary for the borrower to cash in. Another industry term for this kind of loan is “asset depletion mortgage. ”.
In actuality, these presumptions are more cautious than the guidelines set forth by Freddie Mac and Fannie Mae, which are also followed by mortgage lenders nationwide. The same million-dollar investment account—retirement savings in an IRA or 401(k)—may be eligible under the Fannie and Freddie regulations for a “three-year continuance of income.” This calculation shows that the million-dollar account, split over three years, is equal to $233,333 in annual income ($1,000,000 less a 30% market-risk discount, split over three years).
• You don’t need to put down 20 percent. “The myth is still out there,” says Quicken’s Banfield. “But Fannie and Freddie programs allow for mortgages that are 97 percent of a home purchase. FHA mortgages go to 96. 5 percent. The Veterans Administration will do 100 percent. ”.
• Reverse mortgages can be legit. Boomers have, on average, just over $125,000 in home equity, according to Svenja Gudell, chief economist of Zillow. They can be a lifeline for retirees who must use home equity for living expenses. ” A “cash out” mortgage or home equity line of credit can also tap this value. However, unlike a normal 15- or 30-year mortgage, the reverse mortgage loan compounds, with the growing balance due when the borrower moves out or passes away. “Bad actors have given reverse mortgages a bad name,” says Bankrate’s McBride, “but the product is sound. ” Borrowers must be at least 62 years old and are required to go through reverse mortgage counseling. One Reverse Mortgage from Quicken Loans is among the companies that provide Home Equity Conversion Mortgages (HECM) via the Federal Housing Administration. CEO Gregg Smith says, “the home should be a key asset in planning for retirement. ”.
Should I get a 30-year mortgage? | About That
Can I still get a 30-year mortgage if I’m 25 or 70?
And if you’re looking to buy a house, you might wonder if you can still land a 30-year mortgage when your age is north of 60. The short answer: absolutely! Luckily, whether you’re 25 or 70, lenders look only at certain numbers when reviewing a mortgage application.
Are older adults eligible for a 30-year mortgage?
The best advice is for homeowners to investigate all of their financing options, consider their personal finances and make an informed decision. Older adults often assume that they are not eligible for a 30-year mortgage. Legally, however, banks can only offer loans based on financial qualifications alone.
Can I still get a 30-year mortgage if I’m 60?
You made it to retirement. And can now enjoy the perks of freedom, which may include moving closer to the kids, escaping to warmer climes, or downsizing. And if you’re looking to buy a house, you might wonder if you can still land a 30-year mortgage when your age is north of 60. The short answer: absolutely!
Can you get a 30-year mortgage if you’re retired?
When you’re retired, though, landing a 30-year mortgage can be more complicated. So here’s what older borrowers should know about income qualifications before applying for a mortgage. Older borrowers are protected by something called the Equal Credit Opportunity Act, which means mortgage lenders can’t deny their applications based on age.