It might not make sense for an elderly person to take out a mortgage, but that doesn’t mean it’s not allowed. It’s against the law for mortgage lenders to discriminate against borrowers based on their age. That being said, you can be as old as you want and apply for a mortgage. Whether you qualify or not is a different story, but your age won’t play a role in the decision.
Keep reading to see the factors that may affect the elderly when they want a loan.
You Need Good Credit
The elderly often have their debts paid off, which means there’s nothing reporting on their credit reports. While this seems like a good thing to be without debt, there’s no credit history for lenders to look at when deciding if you’re a good risk.
This doesn’t mean you have to have a mortgage if you want to get a mortgage. If you have credit cards and you regularly pay them off, that will suffice. Lenders just need to see a track record of timely payments on some type of debt. If it’s been many years since your last debt existed, this could be a problem.
Your Income Must be Steady
The elderly are often retired. This could mean living on a fixed income. It could also mean living off retirement savings. Not every elderly person is retired, though, so there’s still the chance that you make enough money to qualify for a loan.
Lenders need to see consistency and reliability. This means you must be able to prove that you receive your income at regular intervals. You must also be able to prove that it should continue for the foreseeable future.
The most common types of income are social security and pension income. If you have award letters stating the amount of income you receive and the frequency you receive them, it should suffice. Lenders will then need proof of receipt of the funds, which you can do with your bank statements. Lenders need to see that you actually receive the income you are supposed to receive and on the dates you are supposed to receive them.
If you have unsteady income or you withdraw from your retirement savings as you see fit, you may hit a stumbling block. Some lenders can use your investments as proof of income, but they must be able to cover the loan payments over a 30-year period. It will be up to lender discretion if they want to use those funds.
You Need a Low Debt Ratio
Lenders are going to look at your debt ratio too. Even if you don’t have any debts other than the new mortgage, you’ll still have a debt ratio. Your housing ratio will need to be between 28% and 31% of your gross monthly income. The exact amount depends on the loan program you use. If you go the conventional route, you can have a payment that is around 28% of your gross monthly income. If you have to go the government-backed route, such as an FHA loan, you may have a payment that’s as high as 31% of your gross monthly income.
If you do have other debts, you won’t be able to have a debt ratio higher than 43% on the back-end. This means the total of all of your monthly debts, such as car payments, credit card payments, or personal loans. If you are older, chances are that you don’t have many of these loans, but it’s a possibility, so you should know the rules regarding mortgage eligibility.
Is a Reverse Mortgage The Answer?
If you already own your home free and clear, you may want a reverse mortgage. This mortgage gives you access to the equity in your home, but it doesn’t require you to make payments until you move out of the home. This means if you downsize, move to a nursing home, or pass away, the loan becomes due and payable. Until that point though, the only thing you have to worry about is paying the taxes and insurance on the home and keeping up with the home’s maintenance.
Reverse mortgages are only eligible for those ages 62 and older. If you do qualify for this program, you may want to look at it as an option as it can keep more money in your pocket now rather than forcing you to pay principal and interest during a time when you have little income and need all of the cash you can get.
You are never too old to get a mortgage as far as the mortgage laws are required. Whether you should consider a mortgage or not at an elderly age is a personal decision. You do have options, including a reverse mortgage, so make sure you talk to a lender about all of your options so you know which choice to take.