The Equal Credit Opportunity Act clearly states that it is illegal to discriminate against loan seekers on the basis of age. You can, however, be denied a Federal Housing Administration mortgage you are not financially qualified to take out the loan. The following are general considerations that can have an impact on the approval or rejection of your FHA loan application as a senior citizen:
If the bank or mortgage company thinks your income is not enough, you could be denied the loan. The same is true for your credit score: If it’s too low, you may be rejected. A FICO score 740 or more is usually fine. If it’s below 640, you may get a mortgage but at a higher interest rate. Your debt must be less than 43% of your gross monthly income, but overall, your budget and personal finances will ultimately determine your capability to pay the mortgage. 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 have no home to sell, or if you won’t have enough from the sale to make the down payment, you can borrow from your savings, but that will have a negative effect on your current retirement income. Try computing 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 can scarcely make a dent in the principal during the first few years. Should you sell the house in the future, you may only make a tiny profit, if you can even regain your original investment that is. It’s always smart to be aware of your own figures, thanks to your handy FHA mortgage calculator.
Years of Stay
You may take out a new mortgage or refinance for lower interest. Or you could sell your present house to downsize for more convenient maintenance. Both are good reasons to take on a mortgage as a senior. However, note that this will only be an advantage while you’re keeping the mortgage. If you sell a recently purchased or refinanced home, you could end up spending more than staying put, not just financially but even physically. It’s no contest – run some calculations on your FHA mortgage calculator to help you come up with a wise decision.
Deciding whether to get a mortgage can also be affected by what happens to your income if your spouse dies (as surviving spouse, your net cash flow will probably be reduced). Other factors related to income can include the size of your credit and whether you use part of your current home’s sale or mortgage refinance to pay off such debt. Another way your FHA mortgage calculator comes in handy.
Lastly, with proper planning, estate problems can be avoided even if you die prior to the mortgage being paid off. This way, you can spare your heirs the negative reality of a foreclosure.