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. ”.
Certainly! Lenders are not allowed to discriminate against older borrowers, and there is no upper age limit for obtaining a mortgage. You can apply for a mortgage at any age, even 55, as long as you meet the lender’s requirements for income, credit score, and down payment.
Here’s what you need to know about getting a mortgage at 55:
Requirements:
- Income: You need to have a steady income to qualify for a mortgage. This can include your salary, pension, Social Security payments, or other reliable sources of income.
- Credit score: Your credit score is a major factor in determining your eligibility and interest rate. A higher credit score will give you access to better rates and terms.
- Down payment: You’ll need to make a down payment on the home you’re buying. The amount of the down payment will vary depending on the lender and the loan program.
Pros and Cons of Getting a Mortgage at 55:
Pros:
- Lower monthly payments: A 30-year mortgage will have lower monthly payments than a shorter-term mortgage, making it more affordable for retirees or those on a fixed income.
- Tax benefits: You may be able to deduct the interest you pay on your mortgage from your taxes, which can save you money.
- Build equity: As you pay down your mortgage, you’ll build equity in your home, which can be a valuable asset.
Cons:
- Longer repayment period: A 30-year mortgage means you’ll be paying interest for a longer period of time, which will ultimately cost you more money.
- Less time to build equity: If you’re nearing retirement, you may have less time to build equity in your home before you need to sell it.
- Potential for higher interest rates: Depending on your credit score and other factors, you may have to pay a higher interest rate on a 30-year mortgage than on a shorter-term mortgage.
Alternatives to a 30-Year Mortgage:
- Reverse mortgage: A reverse mortgage allows homeowners over 62 to access the equity in their home without having to make monthly payments. However, you’ll have to repay the loan, plus interest, when you sell your home or move out.
- Home equity line of credit (HELOC): A HELOC allows you to borrow money against the equity in your home. You only pay interest on the amount you borrow, and you can repay the loan at any time.
- Downsizing: If you’re looking to downsize your home, you may be able to use the proceeds from the sale of your current home to buy a smaller home outright.
Ultimately, the decision of whether or not to get a mortgage at 55 is a personal one. Consider your financial situation, your retirement goals, and your individual needs before making a decision.
Here are some additional resources that you may find helpful:
- Home Financing Options for Those Over 55: https://www.newhomesource.com/learn/home-financing-options-over-55/
- Practicality of 30 year fixed mortgage at 55 years of age: https://money.stackexchange.com/questions/114895/practicality-of-30-year-fixed-mortgage-at-55-years-of-age
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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. ”.
From the Mortgage Nerd… Reverse Mortgages at 55 Years Old!
FAQ
Can a 55 year old get a 30 year mortgage?
Can I get a mortgage if I’m 55?
What is the oldest age you can get a mortgage?
At what age does it become harder to get a mortgage?
Can a 55 year old get a mortgage?
Homebuyers who are over 55 and looking to move to more manageable housing or to digs closer to the grandkids need not worry about whether they can qualify for a mortgage. It is illegal to discriminate against anyone applying for financing because of their age, which is a protected class under the Fair Housing Act.
Can a 62 year old get a mortgage?
The good news is that, as long as you’re above the age of majority and you can meet the financial requirements of a home, you can take out a mortgage. Plus, older homebuyers have access to age-specific loan products such as reverse mortgages, which are only available to seniors 62 and over.
Can seniors get a home loan based on age?
Despite laws prohibiting lending discrimination on the basis of age, it can still be challenging for seniors to qualify for home financing. In fact, a 2023 working paper out of the Federal Reserve Bank of Philadelphia found a link between the rejection rate on mortgage applications and the age of the borrower.
Can a senior get a mortgage?
Here’s what to know about getting a mortgage as a senior. Roughly two-thirds of adults who own a home have a mortgage, according to 2022 data from the U.S. Federal Reserve. Baby boomers carry an average of $190,441 in mortgage debt — the second-lowest balance, behind the Silent Generation, according to 2023 data from Experian.