The Equal Credit Opportunity Act unmistakably states that it is illegal to decline loan applicants because of age. However, you can be denied a Federal Housing Administration mortgage if you do not qualify financially for the loan. Here are general considerations that can affect whether or not you will be approved for an FHA mortgage as a senior:
If the bank or mortgage company finds your income inadequate, you may be denied the loan. Same is true for your credit score: too low could mean a rejection. If your FICO score is at least 740, you’re fine. Below 640, you may be approved but at a greater interest rate. Your debt has to be under 43% of your gross monthly income, but in the overall picture, it is your budget and personal finances that will determine if you can afford the mortgage or not. Compute your own figures using an FHA mortgage calculator.
Typically, you will have to shell out several thousand dollars as down payment for a mortgage, probably from the proceeds of your current home’s sale. If you don’t have a home to sell, or if you won’t be making enough to make the down payment, you can get the money from your savings, but that will reduce your existing retirement income. Try to compute using an FHA mortgage calculator.
If you are mortgage free at the moment, you may hesitate to take on house payments all over again. The idea of taking on a mortgage during one’s senior years is made more confusing by the fact that mortgages, by definition, are laden with interest. You may hardly make a dent in the principal wihtin the first few years. If you must sell the house later on, you may make but a small profit from it, if you can even recover your original investment. It’s always smart to be aware of your own figures, thanks to your handy FHA mortgage calculator.
Years of Stay
You may get a new mortgage or refinance for less interest. Or you may just sell your existing property to downsize for more convenient upkeep. Both are good reasons to apply for a mortgage when you’re a senior. However, note that this will only be an advantage while you’re keeping the mortgage. If you sell a home you just bought or refinanced, you could end up spending more, physically and financially, than if you just stayed. Don’t decide without at least doing some calculations on an FHA mortgage calculator.
Deciding whether to apply for a mortgage can also depend on what happens to your cash flow should your spouse pass on (net cash flow is usually decreased for the surviving spouse). Other income-related factors can include the amount of credit you have, as well as whether a portion of the proceeds from the sale or mortgage refinance of your current home is used to settle that debt. Another scenario that calls for your handy FHA mortgage calculator.
Finally, with the right planning, estate issues can be avoided even if you passed away before you could pay off the mortgage. This means your heirs will not have to go through the devastating experience of seeing your home foreclosed.