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. ”.
Getting a mortgage in your 50s can be a great way to achieve your dream of homeownership, but it’s important to consider the unique challenges and opportunities that come with buying a home at this stage in life.
Here’s what you need to know:
Age doesn’t matter: Contrary to popular belief, your age doesn’t automatically disqualify you from getting a mortgage. Lenders are primarily concerned with your ability to repay the loan, not your age.
Credit history matters: Having a strong credit history is crucial for securing a favorable interest rate and loan terms. If you haven’t used credit recently, consider using a credit card responsibly and paying it off in full each month to build a positive credit history.
Retirement income counts: Social Security and pension income are considered valid sources of income for mortgage applications This means retirees can still qualify for a mortgage even if they don’t have traditional employment income.
Savings can be your friend: If you have significant savings, you can use them as additional income to qualify for a larger loan amount. Some lenders offer specialized mortgage programs that consider investment accounts as income sources.
Flexibility in down payment: You do not require a down payment of 2020 to obtain a mortgage. Numerous initiatives permit down payments as low as 3%, increasing the accessibility of home ownership.
Reverse mortgages: With this choice, elderly people can access the equity in their homes without having to make monthly payments. But before thinking about this option, it’s crucial to comprehend the terms and conditions of reverse mortgages.
Here are some more things to think about if you’re in your 50s and want to get a mortgage:
- How much house can you afford? Consider your income, expenses, and retirement goals when determining your budget.
- Is a shorter mortgage term better? Opting for a 15-year mortgage instead of a 30-year mortgage can help you pay off the loan faster and save on interest.
- Should you prioritize paying off your mortgage or saving for retirement? Find a balance between paying down your mortgage and contributing to your retirement savings.
- Where do you want to live? Consider your long-term lifestyle goals and choose a location that suits your needs.
- What is your health like? Unexpected medical expenses can impact your ability to make mortgage payments.
- How often do your children visit? If your family visits frequently, consider a larger home with more bedrooms.
Even though there are certain obstacles to overcome when applying for a mortgage in your 50s, with careful preparation and thought, you can truly realize your dream of becoming a homeowner.
Here are some additional resources that you may find helpful:
- Getting a Mortgage in Your 50s: https://www.investopedia.com/articles/personal-finance/020615/getting-mortgage-your-50s.asp
- Are You Ever Too Old to Get a Mortgage? https://www.thisoldhouse.com/home-finances/21015657/are-you-ever-too-old-to-get-a-mortgage
- Can a 70-Year-Old Get a 30-Year Mortgage? https://www.investopedia.com/ask/answers/041615/can-70yearold-get-30year-mortgage.asp
Remember, it’s never too late to achieve your dream of homeownership. With careful planning and the right resources, you can make it happen.
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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. ”.
Paying off a 30 year Mortgage at 50
FAQ
Is 50 too old for a 30-year mortgage?
Can a 55 year old man get a 30-year mortgage?
At what age do banks stop giving 30-year mortgages?
Does it make sense to buy a house at age 50?
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.
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.
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!
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.