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Is There a Mortgage Age Limit When Buying a Home?
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If you’re an older homebuyer who’s concerned about exceeding a mortgage age limit, rest assured that your birthdate won’t be an issue for you. Focus your energy instead on picking the right mortgage product and meeting your lender’s requirements.
What’s the mortgage age limit?
There isn’t a legal, maximum mortgage age limit to meet when taking out a mortgage. In fact, age is a protected class under federal anti-discrimination laws. What does matter is your ability to qualify for and repay the loan you’re attempting to borrow.
“If you’ve got continuation of income it doesn’t matter,” said Pava Leyrer, chief operating officer at Northern Mortgage Services in Grandville, Mich. “You can be 100 years old and still get a 30-year mortgage. Everybody laughs at it, but, technically, that’s true.”
No matter your age, it’s necessary for you to meet minimum requirements for both your lender and chosen mortgage program to get approved and move forward with your home purchase.
Is there a minimum age to get a mortgage?
When you buy a home, you’re entering into a legally binding agreement with a mortgage lender that outlines the terms of the property purchase. You must meet your state’s age of majority or the legal contract age to get a mortgage.
In most states, 18 is the minimum age required to buy a home, Leyrer said.
Still, young, aspiring homebuyers tend to face several challenges when applying for a mortgage even after turning 18. One of the biggest obstacles? Affordability.
About 58% of new and existing homes sold during the fourth quarter of 2020 were affordable to families earning an adjusted U.S. median income of $72,900, according to the February 2021 Housing Opportunity Index from the National Association of Home Builders (NAHB) and Wells Fargo.
Younger buyers also struggle with meeting credit requirements, simply because they often don’t have enough experience with financial products, such as an auto loan or credit card, Leyrer said.
While you can still get a mortgage without a credit score, there’s a catch.
“You end up paying more; people don’t realize that,” Leyrer said. “There’s no way [for lenders] to gauge whether or not you’ll pay in the future.”
Another recurring issue is not having enough money for a down payment, closing costs and related homebuying expenses.
4 types of home loans for seniors
Whether you’re a member of the silent generation or a baby boomer, there isn’t a catchall mortgage type that fits your financial situation. Your borrowing decision ultimately depends on what’s best for you.
“Make sure that you understand what’s out there and what fits your personal needs, not the needs of the person speaking to you,” Leyrer said.
Consider one of the following mortgage products while preparing for your home purchase.
Conventional loans are backed by private lenders rather than the federal government, and typically have stricter borrower requirements than other loan programs. They follow the guidelines established by Fannie Mae and Freddie Mac, two government-sponsored enterprises that buy and sell mortgages.
Most conventional lenders require a minimum 620 credit score. You may qualify for a conventional loan with as little as 3% down, but you’ll need to compensate for a smaller down payment with at least a 680 or 720 credit score, depending on your debt-to-income (DTI) ratio.
A small down payment also means you’ll be responsible for private mortgage insurance (PMI), which protects your lender from losing money if you fail to make monthly payments. To avoid paying PMI as part of your monthly mortgage payment, you’ll need to make a minimum 20% down payment at closing.
The Federal Housing Administration (FHA) insures FHA loans, which have looser requirements than conventional loans. You could qualify with as low as a 500 credit score, though you’d have a minimum 10% down payment requirement. Otherwise, the minimum 3.5% down payment is for those borrowers with a 580 credit score or higher.
FHA borrowers also pay for upfront mortgage insurance, which costs 1.75% of their loan amount, and annual mortgage insurance, which ranges from 0.45% to 1.05% of their loan amount. If you put down less than 10%, your annual premium will be in place for the life of your loan. If you put down 10% or more, you can cancel your FHA mortgage insurance premiums after 11 years.
VA loans are backed by the U.S. Department of Veterans Affairs (VA) and exclusive to U.S. military service members, veterans and surviving spouses. You must meet service requirements and show proof of a steady income in order to qualify.
Lenders often enforce a 620 credit score threshold, though you may get approved with a lower score. There’s also an upfront funding fee paid at closing, an amount that depends on your loan purpose, how many times you’ve used your VA loan benefits and your down payment size.
The U.S. Department of Agriculture (USDA) backs USDA loans for homebuyers in rural areas. You’ll need a minimum 640 credit score for automatic approval, though borrowers with lower scores may also qualify. Additionally, you may not have to contribute any money for a down payment.
There are also upfront and annual guarantee fees equal to 1% and 0.35% of the loan amount, respectively. You’ll also need to meet income requirements and the home you want to buy must be located in a USDA-designated rural area.