While many Americans over the age of 55 used to have the mindset of being mortgage‐free, the trends are changing significantly. An increasing number of older Americans are currently choosing to have a mortgage rather than pay cash for a home in order to take advantage of tax breaks and the historically low-interest rates. Additionally, many are opting for cash‐out refinances on their primary residence and using that equity as a down payment on a second home or investment property, or to pay off other high-interest debt.
But will I qualify for a mortgage loan without full‐time employment?
While lending guidelines have changed dramatically since the 2008 financial crisis, and even more so with COVID-19, if the borrower has regular monthly income, such as Social Security and/or pension income, and can meet the debt to income and credit requirements, they can obtain a mortgage loan. They may even be able to use eligible retirement assets to qualify under certain conditions. This is particularly helpful for those who have significant savings but reduced or fixed income since leaving the workforce.
Some older Americans are questioning if they will be able to obtain a 30-year mortgage?
The answer is yes, as long as they meet the loan requirements. The Equal Opportunity Credit Act prohibits lender discrimination for various protected categories, including the borrower’s age. The lender must base his or her decision to approve a loan on the borrower’s creditworthiness.
Older Americans and retirees who have sufficient credit and proof of assets can qualify for a mortgage, but the process looks different than it used to. Lenders need to be positive that you meet the qualifications and have the ability to repay the loan, and your loan originator can assist you with reviewing your credit, income and assets to get you pre-approved for your new mortgage. When preparing for your loan application, include all of your income and assets that may prove helpful.
Generational trends in real estate
People 55+:
- bought 39% of homes sold in 2020
- sold 53% of homes sold in 2020
- were most likely to buy a home to be near family or friends
- were most likely to buy an investment property
- were least likely to avoid renovations when purchasing
- were least likely to make compromises in choosing their home
- Were least likely to finance their home purchase
- Were most likely to get a VA loan
- Were most likely to move into a less-expensive home than their previous home
Source: National Association of Realtors Home Buyer and Seller Generational Trends
Megan V. Szuster (NMLS 1703764) is a loan originator at United Home Loan Services, Inc. (NMLS 70641), an equal housing lender. You can reach her at 864-915-0835 or megan@uhlsinc.com.
