Age Is Just a Number—Except When You’re Applying for a Mortgage
Though they can’t discriminate, lenders take into account age-related factors for applicants 65 and older. Here’s what you need to
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The process of getting a mortgage can be a challenging one for applicants of any age. But for older borrowers, those who are no longer drawing a paycheck or are relying on passive income, proving phệ a birthday calculator
that they have sufficient income và assets lớn qualify can be even more daunting. This issue affects more applicants than you would expect. According bự Home Mortgage Disclosure Act dữ liệu provided mập The Wall Street Journal by the Consumer Financial Protection Bureau, 13 % of all mortgages originated in 2021 were by people 65 years of age & older. That is kết thúc 1.9 million mortgages. Lenders typically base their mortgage decisions on an applicant’s income, assets, debts và credit score. Discrimination against credit applicants on the basis of age is prohibited by the Equal Credit Opportunity Act. However, while lenders may not consider age per se when qualifying an applicant, they can look at age-related factors such as whether that applicant’s income might drop because they are about béo retire. That is why lenders scrutinize not only the source of a borrower’s income, but the likelihood that it will continue as well .
“ Regardless of your work status, there is still a requirement that you be able bự tư vấn a mortgage, with verified cash flow & income, ” said Charlie Nilsen, senior managing director of SVB Private, a private ngân hàng based in Santa Clara, Calif. All types of income, active và passive, are included when qualifying an applicant for a mortgage. But the process of verifying that income may vary. “ For example, when an individual receives Social Security benefits, all we have mập bởi is verify that the award was Khủng the individual we’re lending béo or that they are the beneficiary of that award, ” said Brian Rugg, chief credit officer of loanDepot Inc. “ With Social Security retirement income, it’s typically a lifetime guarantee, so sánh there’s no need bự validate the continuance of the income. ” For retirees who rely on an investment portfolio phệ cover living expenses, qualifying for a mortgage is slightly different, experts say, & the methods vary depending on whether that retiree is taking required minimum distributions, withdrawals from retirement accounts that are required by the IRS, or just dipping into a portfolio when he or she needs funds. If a borrower is taking required minimum distributions from an IRA or 401 ( k ), the income they receive can be used for qualifying as long as the tài khoản has sufficient assets for those distributions Khủng continue for three years, according mập Bill Banfield, executive vice president of capital markets for Rocket Mortgage in Detroit.
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If an applicant is instead withdrawing money from nonretirement accounts when they need cash, the lender can still include that income under the so-called “ asset depletion method, ” where the eligible assets are divided by the term of the mortgage và the resulting amount is used béo calculate the applicant’s monthly income, Mr. Banfield said. Bear in mind, however, that most lenders will only use 70 % of the investment portfolio béo tài khoản for market volatility. So, for example, if a borrower has an investment portfolio worth USD một million và applies for a 30 – year mortgage, the lender would consider $ 700,000 phệ be eligible assets for qualifying & the monthly income included for qualifying would be USD 1,944. 44 ( $ 700,000 / 360 ), Mr. Banfield said. Here are some things older adults should consider before applying for a mortgage. Seek out a lender that has experience with older borrowers. A survey released in November 2022 by Zillow Home Loans found that 72 % of prospective trang chính buyers had not shopped around, nor had any plans to shop around, for a mortgage that best suits their financial situation. But, working with a lender who has experience with older applicants can mean the difference between approval và rejection. Mr. Rugg’s father, a veteran, has an 800 FICO score & no debt. He called a lending institution he banked with phệ ask about a cash-out mortgage, & they asked if he was employed. He said no, và they told him they couldn’t help him. Although he had other sources of income, they didn’t ask about it. When he called the lender back lớn explain that he had other sources of income, they took his application, & he qualified for the mortgage. That is why Melissa Cohn, a regional vice president at William Raveis Mortgage, suggests dealing with a human và not going trực tuyến lớn fill out a mortgage application. “ There may not be places bự put all your income, ” she said. “ The first line will be base income, then bonus, commissions, dividends & interest. There is no asset-depletion line on a mortgage application. You need lớn speak lớn an expert, someone who is experienced & will give you good advice. ”
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Understand the impact of cosigning for someone else’s loan. If you’ve cosigned for a trang chính or oto loan for children or grandchildren, be aware that those loans can affect your credit score. “ Any derogatory payments affect the credit score of the retired person, ” Mr. Banfield said. “ Even if there is no delinquency, it’s another debt reported on your credit báo cáo, so sánh even if you have all the money saved up that you want, if your credit score drops below eligible levels, you won’t qualify for a mortgage. ” Consider alternatives for short-term trang chủ financing. For short-term needs, such as bridge financing for those selling a trang chủ và buying a mới nhất one, there are alternatives other than a trang chủ mortgage. “ They can bởi an asset-based loan or an investment credit line và borrow against their investment portfolio mập pay cash for the mới ra trang chính, ” said Michael Silver, a certified financial planner in Boca Raton, Fla. “ I have many clients who have done that, but it’s always a shorter-term solution where you have a kế hoạch phệ pay it back because the rate fluctuates monthly. ” Mr. Silver said the rates are generally 1.5 percentage points kết thúc the 30 – day LIBOR or federal funds rates, và adjust monthly .
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