Your age doesn’t have anything to do with your ability to get approved for a mortgage. By law, a lender can’t deny you based on age. However, if you are older it could be a little more difficult to gain that approval. The difficulty isn’t based on your age, just your qualifications. The same would apply for someone that was younger and in the same financial situation.
Why Does Age Matter?
Again, it’s not the number, it’s your financial situation. The largest factor is if you are on a fixed income. This could make it difficult to afford a large mortgage payment. Even if you can afford it now, what if something happens in the future? How will you afford the payment? Do you want to put yourself in that situation? It’s may not be the best idea.
Figure Out Your Financial Situation
The best first step is to figure out your financial situation. Why do you need a mortgage? Are you buying a primary residence? Many seniors downsize, but find out that their current home isn’t worth enough to pay for a new home. In this instance, they may need a mortgage. How do you know if you qualify? Check the following parameters:
- Your credit score – You should have a minimum credit score of 680. There are programs that allow lower scores, such as the FHA loan, but 680 is a good benchmark. This shows lenders you are financially responsible.
- Your debt ratio –Too many debts may mean a lender won’t give you a new loan. Generally speaking, 43% is the maximum back-end ratio. Some programs, like conventional loans, though, don’t’ allow ratios higher than 36% on the back-end.
If you meet the above requirements, don’t jump right into a mortgage. Instead, look at it in a practical light. Can you truly afford the loan? Meaning, do you want to add that amount to your monthly load? Let’s say, for example, your new mortgage would cost $1,000. What other bills do you have? Think of credit card bills and installment loans. Also, consider the daily cost of living. Taxes, insurance, medical bills, and utilities are just a few of the costs. Can you realistically afford yet another payment?
Consider the Risks of Being Older with a Mortgage
Aside from a fixed income, you have the risk of being older. Without sounding too harsh, you must consider your family when you are no longer here. If you are married, what would happen to your spouse’s income? If you live on social security, his/her income could greatly decrease upon your passing. Would your spouse be able to afford the loan comfortably? If not, they could lose the home. Now not only did they lose a spouse, they also lost their home.
If you aren’t married, you still have other family members to consider. Who will inherit your home? They will also inherit the mortgage. Do you want to leave your loved ones in debt? The mortgage doesn’t just go away. Someone will have to pay it off when they sell the home. Obviously, the profits your family makes isn’t as important as you not being here, it’s still a consideration.
Consider the risk of rising property taxes too. No one can predict what taxes will do. If you live in an area where you can’t freeze your taxes, you could be in trouble. It’s not unheard of for taxes to increase as much as $1,000 per year. That might not sound like a lot since it’s only $83 a month, but it adds up. If you are already stretched to the limit, increasing property taxes could make things more difficult.
Figuring Out if a Mortgage is Worth It
The best thing to do is look at the situation just like a younger person would. Decide if you truly can afford the loan. Don’t just look at it on paper. Create a budget and think it through. Don’t just think of the present. Think long and hard into the future. Where do you see yourself in 10 years? Maybe you work now but won’t in the next year or so. That could have an impact on whether you can afford the loan.
If you decide you can afford the loan, determine if you need it. Why are you moving? If you are downsizing, it likely makes sense. Are you spending too much though? If you buy a home that exceeds what you’ll make on your current home, it might not be worth it. Keep things in perspective so you don’t get caught up in the emotion of buying a home. It’s easy to fall in love with a home and do whatever it takes to make ends meet. When you are older, this isn’t the best choice.
The Final Word
Deciding whether you should get a mortgage when you are older is a personal decision. Think long and hard about the consequences before deciding. Do you really need the home? Is there a less expensive home you could buy? How well set up will your family members be upon your passing? You must consider these things. Only then can you decide whether a new mortgage is worth it or not.