The Essential Laws of Loans Explained

August 15, 2017

Miscellaneous

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Is It Ever Too Late to Get an FHA Mortgage?

The Equal Credit Opportunity Act unmistakably states that it is illegal to decline loan applicants because 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:

Qualification

If the bank or mortgage company finds your income inadequate, you may be denied the loan. The same is true for your credit score: If it’s too low, you may be rejected. If your FICO score is at least 740, you’re fine. If it’s under 640, you may get approved but with higher interest. Your debt has to be under 43% of your gross monthly income, but in the overall picture, it is your budget and personal finances that will determine if you can afford the mortgage or not. Use an FHA mortgage calculator to compute your own figures.

Down Payment

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 property to sell, or if you won’t make enough cash on the sale for the down payment, you may borrow from your savings, but that will decrease your current retirement income. Try computing using an FHA mortgage calculator.

Mortgage-Free

If you are mortgage free at present, you may think twice about taking on house payments again. The idea of getting a mortgage late in life is made even more complex by the definition of the word, “mortgage” itself – that it is loaded with interest. You could barely cut the principal over 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 wise to know your own figures, again, thanks to your FHA mortgage calculator.

Years of Stay

You may plan on taking out a new mortgage or refinance to get a cheaper interest rate. Or you may just sell your existing property to downsize for more convenient upkeep. These two are good reasons for taking on a mortgage in your senior years. However, note that this will only be an advantage while you’re keeping the mortgage. Selling a recently bought or refinanced home can have you spending more, both financially and physically. It’s no contest – run some calculations on your FHA mortgage calculator to help you come up with a wise decision.

Income

Deciding to get a mortgage or not can also be affected by your cash flow after your spouse passes away (net cash flow is often reduced for the surviving spouse). 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.

Estate Situation

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.