Getting a mortgage – particularly a traditional, forward mortgage – in retirement can be a tricky proposition for someone relying on a fixed income.
There are a lot of new factors that a prospective mortgage borrower in their later years might have to consider, especially if the course of action they’re considering will require a new monthly expense on a fixed income. One such option they can consider is, of course, a reverse mortgage that negates the need to make a new monthly mortgage payment, but there may be other things to consider as well according to a new article at Bankrate.
For a senior who may be looking at the possibility of a new, traditional mortgage in retirement, they must know that lenders cannot discriminate against them on the basis of age. That being said, forward originators in some cases are seeing streams of business from older borrowers, sometimes those much more advanced in age than even a typical reverse mortgage borrower in his or her 70s.
“I once did a 30-year mortgage for a 97-year-old woman,” said Michael Becker, sales manager and loan originator at Sierra Pacific Mortgage in Lutherville, Md. to Bankrate. “She was lucid, understood what she was doing and just wanted to help out a family member [by taking] some cash out of her home, and had the income to qualify and the equity in the home — she owned it free and clear — so she was approved.”
Since the same underwriting guidelines apply to seniors as they do to younger adults, all they need is the income and assets to qualify for the loan, Becker explains to Bankrate. Even non-taxable income like what can come from Social Security or tax-exempt interest can be “grossed up” to help smooth the qualification process, he tells the outlet.
However, property upkeep, taxes and insurance – which comes into play uniformly for both forward and reverse mortgage borrowers – must be considered in addition to the fixed income status of the potential borrower, according to Mark Hamrick, senior economic analyst and Washington bureau chief for Bankrate to his outlet.
“While inflation has been fairly muted for many years now, prices have risen for such staples as shelter and health care over time,” Hamrick tells Bankrate. “As with people of all ages, having a budget, limiting expenses and accurately accounting for income expectations are key.”
The piece goes on to list six potential loan options available to seniors, including a conventional loan; cash-out refinance; home equity loan; home equity line of credit (HELOC); Home Equity Conversion Mortgage (HECM); or a “no-document” mortgage. Notice that HECM comes in as the second-to-last option on the outlet’s list.
Read the article at Bankrate.