How Old Can You Be and Get a Mortgage?
In most states, you must be 18 years old to legally take out a loan. But is there a such thing as being too old for a mortgage? Turns out, there isn’t.
This article explores the challenges young homebuyers face, whether there’s a maximum age limit for homebuyers and which mortgage types might best suit a senior buyer looking to purchase their next home.
We will cover:
- What’s the minimum age required to get a mortgage?
- Is there a maximum age for a mortgage?
- Mortgages for the young at heart
What’s the minimum age required to get a mortgage?
To qualify for a mortgage, you must meet whatever age your state sets as the age of majority or the legal contract age. Remember, when you buy a home, you enter into a legally binding agreement that outlines the purchase of that property.
In most states, the minimum age required to buy a home is 18, said Pava Leyrer, chief operating officer at Northern Mortgage Services in Grandville, Mich.
Still, young, aspiring homebuyers tend to face a number of challenges when they try to qualify for a mortgage even after they turn 18. One of the biggest obstacles? Affordability.
Home affordability is at a 10-year low, according to the latest Housing Opportunity Index from the National Association of Home Builders and Wells Fargo. Just over half of new and existing homes sold during the fourth quarter of 2018 were affordable to families earning at least $71,900, the national median income.
Then there’s the perception of affordability. When non-owners were asked the main reason why they currently don’t own a home, 43% said they can’t afford to buy, according to the 2019 Aspiring Homebuyers Profile from the National Association of REALTORS.
Younger buyers also struggle with credit requirements, as many of them may not have an established credit history. They 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, it will cost you.
“You end up paying more. People don’t realize that,” Leyrer said. “There’s no way to gauge whether or not you’ll pay in the future.”
Is there a maximum age for a mortgage?
Legally, there isn’t a maximum age a homebuyer can be to get a mortgage. In fact, age is a protected class under federal anti-discrimination law. What matters is your ability to repay the loan.
“If you’ve got continuation of income it doesn’t matter,” Leyrer said. “You can be 100 years old and still get a 30-year mortgage. Everybody laughs at it, but technically that’s true.”
If an elderly borrower were to die before their mortgage was paid off, the estate would handle the debt. The home may need to be sold to pay off the mortgage.
No matter your age, it’s necessary for you to meet both the lender’s a href=”https://www.lendingtree.com/home/mortgage/minimum-mortgage-requirements/”>requirements and the guidelines established for the mortgage product you’re requesting in order to get approved and move forward.
Mortgages for the young at heart
Whether you’re a baby boomer or of the silent generation, there isn’t really one specific type of mortgage that is sure to suit your financial situation. Your choice should depend 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.
Her senior homebuyers tend to gravitate toward conventional loans for their home purchase, she said. They often want to avoid private mortgage insurance or want to know how quickly they can remove it from their payment. However, many senior homebuyers also still consider FHA loans.
Below are some mortgage products to review while preparing for your next home purchase.
Conventional loans are backed by private lenders, rather than the federal government, and typically have more stricter borrower requirements than other mortgage products. They follow the guidelines set forth by Fannie Mae and Freddie Mac.
Most conventional lenders won’t accept anything lower than a 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 by having a higher credit score.
A small down payment also means you’ll be responsible for private mortgage insurance (PMI) until your loan-to-value ratio reaches 80%. To avoid paying PMI as part of your monthly mortgage payment, you’ll need to put down at least 20% at closing.
FHA loans are backed by the Federal Housing Administration and have less strict requirements compared with conventional loans. The lowest credit score you can have and still possibly qualify is 500, though you’ll need to supply a minimum 10% down payment. Otherwise, the minimum down payment is 3.5% for those borrowers with at least a 580 credit score.
There are mandatory mortgage insurance premiums for FHA borrowers. If you put down less than 10%, your premium will be in place for the life of your loan. If you put down at least 10%, you can cancel your mortgage insurance premium after 11 years.
The U.S. Department of Agriculture offers USDA loans to homebuyers in rural areas. The minimum credit score for automatic approval is 640, though borrowers with lower scores may also qualify. Additionally, you may not have to contribute any money for a down payment.
There are upfront and annual fees that are 1% and 0.35% of the loan amount, respectively. You’ll also need meet income and location requirements.
VA loans are exclusive to members of the U.S. military, including active-duty personnel, reservists, veterans and their families. To qualify, you must meet service requirements and show proof of a steady income.
A common credit score threshold is 620, though you might get approved with a lower score. There’s also an upfront funding fee associated with the mortgage transaction, an amount that depends on whether you’re using your VA loan benefits for the first time and your down payment percentage, should you decide to contribute one.
The bottom line
If you’re an older buyer who’s concerned about your age affecting your mortgage eligibility, you can rest assured that won’t be an issue for you. Instead, focus your energy on ensuring you meet the requirements set forth by your lender and the mortgage product you’re interested in.
For a refresher on the homebuying process, review LendingTree’s step-by-step on how to buy a house.