7 Tips For Senior Borrowers Looking To Find a Mortgage
With today’s economy, everyone may feel a little unsettled. But senior citizens may feel especially challenged by their financial outlook. Seniors who have retired and no longer have their salary to count on may feel financial constraints and have to downsize their budgets.
Senior citizens may wonder if they can qualify for a mortgage to buy a home. They may wonder if they can find a mortgage broker willing to work with them. I’m happy to tell you that older people can get mortgages. Qualifications for a mortgage are the same for every potential customer, including senior citizens. Lenders will look at their income, credit score, and their available cash amount.
According to the FTC (Federal Trade Commission) in the US, for example, senior citizens actually cannot be discriminated against when applying for credit (including a mortgage). A federal law called the Equal Credit Opportunity Act forbids lenders to discriminate against anyone for any reason.
Know Their Credit Score
One of the first things a lender will do is check a potential borrower’s credit score. A potential borrower should find out their score before filling out a credit application. Lenders will see credit score as an assessment of how someone handled credit transactions in the past, and consider it an indication of how reliable they will be at paying back the loan.
Seniors should know ahead of time whether their credit score is good. They should also check to see that any issues raised by the credit report are corrected. If the report says they have a small debt, they would be wise to pay it before applying for a mortgage.
Seniors may have had a financial setback in the past. Even if they are in a good situation now, their credit score indicates a past problem. They should be ready to discuss it with the lender. They may even need to wait until their credit score is clear from that setback.
Learn What They’re Looking For
Before having an appointment with a mortgage broker, they must research what types of loans may be available, and what terms of repayment might be available. They should also find out information about any lender they potentially want to do business with. It is easy to look for consumer reviews of the lenders before going to one of them. Potential borrowers can ask for a referral from family members, friends or coworkers, especially those who have recently financed a mortgage to see which ones they feel can be trusted. Elderly potential borrowers must especially consider the payback terms of a loan. Many home loans offer the lowest rate of interest for loans with a twenty-year term. Senior citizens may wonder if they will be alive in twenty years, so they may shy away from committing themselves to such a loan. Discussing their plans with family members may help the senior citizen devise a contingency plan to repay the loan if they do not survive its term.
Just because they love that castle in the posh neighbourhood doesn’t mean a senior can afford to commit to a loan as large as the “castle” may require. They will need to know how much their loan payment may be, and how much the homeowner or lender is asking for a down payment. They should think seriously about what they can afford now – and what they can commit to paying monthly.
Seniors who plan wisely for their financial needs after retirement may have regular income in addition to their social security retirement or pension payments. Showing evidence of this may convince the lender of their ability to pay back the loan. The could consider using a co-signer with a good credit score.
In addition to knowing the length of the loan term, it’s important to research the type of loan they feel comfortable with. They may prefer a fixed rate mortgage – to be sure they know the amount they’ll be asked to pay each month. However, they may want to allow for a possible change in the mortgage rates and opt for a flexible-rate loan instead.
Senior potential borrowers may feel more comfortable with fixed-rate mortgages since they are more likely to have an income that will not change in the future. They may want the security of knowing how much they will pay each month.
Give as Large a Down Payment as Possible
The more a borrower can defray the loan amount, the lower the mortgage payments will be. Seniors may have been saving money for this purpose or may decide this investment is worth cleaning out their savings. But, an investment in a home is invaluable, so it may be a time when they can consider asking their family for assistance – especially if this will be a home for one of their adult children. If the adult child is financially invested in their own home, it will give them an even more proprietary feeling when living there.
Check on Prepayment Penalties
Anyone anticipating a loan should know if they will be penalised for early prepayment. Financial companies often want to keep receiving the loan’s interest and may penalise a borrower for early repayment. Sometimes, a mortgage holder may choose to repay the loan more quickly if they receive an unexpected influx of cash. Knowing what will happen if the loan is repaid quickly is best.
Seniors – and everyone else – should pay attention to “fine print” like prepayment penalties, so they understand what they are committing to. Some seniors may enter into a mortgage agreement hoping to finish payments before the term expires – so they should check to be sure this won’t hurt them in the end.
Don’t Apply Everywhere
It is important to learn about different lenders and how much they will charge to lend money for a mortgage – but borrowers should do research online or by reputation rather than applying to lots of lenders. Every time a person applies for a loan or mortgage, it is reported to the credit bureau and shows on their credit report. Too many applications can lower a credit score.
Senior citizens may want to be careful and check more than one lender. That’s fine – but the fewer they apply to, the less likely they may damage their credit score because of frequent credit checks.
Following these tips will make an older person more likely to be favourably considered for a mortgage. But, even if everything in their credit rating, income, and down payment is ideal, they may still be turned down for a loan. They shouldn’t be discouraged, or give up! Ask why they were turned down, and fix whatever they are able to fix. Then try again. Senior citizens are just as likely to be approved for a mortgage as any other borrower.
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