When Are You Too Old Or Young For A Mortgage?

By ERIN FLYNN JAY

Age matters when it comes to making important financial decisions, but when is someone too old or young to obtain a mortgage?

Millennials make up 38% of the home-buying market, but Baby Boomers make up 31%, and Generation Z is starting to show interest in homeownership at 3% of buyers, according to the National Association of Realtors.

The Mortgage Note reached out to Neil Anders, host of the Emmy-nominated television program “Financing the American Dream” on CNBC and Bloomberg, and Andy Kolodgie, owner of Sell My House Fast to get their perspectives.

Typically, individuals must be at least 18 years old to enter a legally binding contract, including a mortgage agreement. But Anders said being of legal age doesn’t guarantee approval and lenders consider various factors beyond age when assessing a borrower’s ability to repay the loan.

“One crucial aspect lenders evaluate is the applicant’s income and employment stability,” said Anders. “They want assurance that the borrower has a reliable source of income to make monthly mortgage payments. Consequently, younger individuals who may have limited work history or unstable employment may face challenges in securing a mortgage, regardless of being of legal age.”

Credit history also plays a significant role in mortgage approval. “Lenders assess an applicant’s creditworthiness based on factors such as credit score, payment history, and debt-to-income ratio,” said Anders. “While age isn’t a direct factor, younger applicants may have shorter credit histories, making it difficult for lenders to evaluate their financial responsibility.”

On the flip side, there is no set age at which a person is deemed too old to purchase a home in the United States.

“Those nearing retirement age might face challenges in approval, as lenders may be concerned about their ability to sustain mortgage payments on a fixed income,” said Anders. “However, age discrimination in lending is prohibited by the Equal Credit Opportunity Act, which mandates that lenders assess applicants based on their financial qualifications rather than age.”

Kolodgie agreed that older individuals may encounter age-related considerations when applying for a mortgage but they shouldn’t serve as barriers.

“Age is typically not a barrier to buying a home, provided that the buyer can meet the financial requirements set by lenders and manage the responsibilities of homeownership,” said Kolodgie. “In actuality, a lot of people purchase houses well into their retirement.”

It’s essential for prospective homebuyers to carefully assess their financial readiness before applying for a mortgage, regardless of their age.

“Building a strong credit history, maintaining stable employment, and saving for a down payment are crucial steps in improving mortgage eligibility,” said Anders. “Additionally, consulting with a mortgage lender or financial advisor can provide valuable guidance on navigating the mortgage application process and understanding any age-related considerations.”

By understanding income and credit history considerations and taking proactive steps to strengthen their financial profile, he said individuals of all ages can increase their chances of successfully obtaining a mortgage and achieving their homeownership goals.

What factors do lenders take into consideration?

Kolodgie said some key factors that lenders consider include:

1) Down payment

Lenders consider an applicant’s ability to make a sizable down payment as one of the key factors influencing loan approval. “Because they have had less time to accumulate wealth, younger applicants typically have less saved for a down payment; on the other hand, older applicants might have savings or assets that they can use,” he said.

2) Retirement Status

Lenders may consider retirement plans and income sources, such as Social Security benefits, pensions, or retirement savings accounts, for borrowers who are older. Kolodgie said they might evaluate if the borrower has a steady enough retirement income to pay the mortgage. Similarly, the lenders could ask about your retirement funds. A strong retirement plan is a sign of responsible money management.

3) Long-Term Financial Planning

Kolodgie said the borrower’s long-term financial objectives, including retirement plans and plans to age in place, may be questioned by lenders. This aids in their evaluation of the borrower’s potential to maintain homeownership over time.

4) Life Expectancy and Loan Term

Although life expectancy is not directly related to borrower age, lenders may take this into account when determining mortgage terms. Kolodgie said they might be reluctant to provide older borrowers with long-term mortgages, for instance, if the loan term is much longer than anticipated life expectancy.

The ideal age to buy a home in the U.S. can vary based on personal preferences, financial stability, and unique circumstances.

“Still, a lot of people believe that the best time to purchase a home is between their late 20s and early 40s,” said Kolodgie. “People in this age range frequently have stable jobs, established careers, and may be prepared to settle down. Furthermore, it’s possible that they have saved money for a down payment and are more aware of their long-term housing requirements.”

Nevertheless, there isn’t a universal guideline because a number of variables, including geographic location, market dynamics, and individual objectives, are important. No matter what state you live in, the ideal age to purchase a home depends on your financial situation and life goals.

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