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. However, you can be denied a Federal Housing Administration mortgage if you do not qualify financially for the loan. Here are general considerations that can affect whether or not you will be approved for an FHA mortgage as a senior:
If the bank or mortgage company deems your income insufficient, the loan may be denied. Same is true for your credit score: too low could mean a rejection. 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.
Normally, you would have to spend several thousand dollars in down payment for a mortgage, probably from your current home’s sale. If you have no home to sell, or if you won’t have enough from the sale to make the down payment, you can borrow from your savings, but that will have a negative effect on your current retirement income. Try to compute using an FHA mortgage calculator.
If you are presently mortgage free, you may be cautious about having to make 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. Of course, it’s best to know your own figures, and you can count on an FHA mortgage calculator for this.
Years of Stay
You may plan on taking out a new mortgage or refinance to get a cheaper interest rate. Or you could sell your present house to downsize for more convenient maintenance. Both are good reasons to take on a mortgage as a senior. Note though that the advantage is only as good as how long you keep the mortgage. If you sell a home you just bought or refinanced, you could end up spending more, physically and financially, than if you just stayed. It’s no contest – run some calculations on your FHA mortgage calculator to help you come up with a wise decision.
Deciding whether to apply for a mortgage can also depend on what happens to your cash flow should your spouse pass on (net cash flow is usually decreased 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 scenario where your FHA mortgage calculator comes in handy.
Finally, with the right planning, estate issues can be avoided even if you passed away before you could pay off the mortgage. This way, your heirs can be spared from the unpleasant reality of a foreclosure.