No matter what age bracket you fall in, it’s never too late to buy your dream house. A house is every individual’s need and there is nothing wrong in dreaming of a luxurious home. If you want to acquire a home in your 60s, go for it. However, there is one thing you need to focus on, and that is arranging the money. There are several ways to get the investment you need.
You can always take a loan but being a senior citizen, you have to be extra careful about your application. Lenders are more careful while reviewing home loan applications for senior citizens. So, you must follow proper guidelines to increase your chances of getting a loan. Here are a few tips that should be in your mind.
Opt for Reverse Mortgage
A reverse mortgage helps you buy a new home without the burden of monthly payments. It is specially designed for senior citizens where you borrow money against the equity of your home.
According to ReverseMortgageReviews.org (reversemortgagereviews.org), “Individuals above the age of 62 can purchase a property using a reverse mortgage. This way, they won’t have to make any payments and can easily live in their dream house”.
It is a much more affordable and manageable option. As long as you live on the property, you don’t need to make a single payment. The loan amount is repaid upon your death or when you sell the house.
Furthermore, the borrower only needs to pay according to the worth of his property. So, if you pay your taxes on time and use your house as your primary residence, you will be eligible for a reverse mortgage.
Consider Adding Co-Applicant
Often lenders reject applications of senior citizens due to their age. Lenders believe that older people have income constraints and an uncertain life expectancy which could create trouble in the future. Thus, if you are applying for a loan and want to increase your chances of getting approval, add a young co-applicant.
The co-applicant could be your son, daughter, or any other earning relative with a good credit score. By adding a young co-applicant, you increase the chances of getting your request approved. Lenders even allow you to borrow a higher amount when the co-borrower has a strong financial standing.
Maintain an Acceptable Credit Score
Before applying for a home loan, make sure your credit score is acceptable. Anyone with a credit score above 750 has a better chance of getting a loan. With a low score, you will not be considered financially disciplined. Therefore, improving your credit score is a must. You will get loans at lower rates if your scores are high.
Prefer the Standard or Second Mortgage
Another home loan option for senior citizens is the 30-year standard mortgage plan or the subordinate second mortgage plan.
According to the standard mortgage program, the buyer’s home is kept as collateral. Individuals make a down payment and the remaining amount is paid by financial institutions. You will need to pay back to the institution within a fixed time or according to your contract.
Similarly, a second mortgage is an additional mortgage. If your asset’s value increases over time, you can apply for a second mortgage along with the primary one.
Opt for a Lower Loan to Value Ratio
Loan to value ratio refers to the amount taken to the value of the asset purchased. It means that part of the property’s cost is given as a loan, but arranging the remaining amount is your responsibility.
The LTV ratio can go up to 80-90% of the home’s cost but try to opt for a low value. You can’t pay the entire amount through a loan, and it is better to make a higher down payment.
Senior citizens enhance their chances of getting a home loan by making a significant down payment at the start. A bigger down payment means you need a smaller loan, and it will be approved earlier. The higher the initial payment, the better.
Downsize Your Choice
In your 50’s or 60’s, you won’t feel comfortable navigating through huge yards and corridors. Instead, you might want something compact and manageable. So it’s better to go with something smaller. There is no harm in downsizing. You still get to own a home and live independently.
If you want your lenders to approve your loans, prefer something smaller, which costs you less. Lenders won’t hesitate before giving a smaller loan.
Asses EMI Affordability
Your EMI affordability will also affect a lender’s decision regarding your home loan application. An applicant’s EMI must be within 50 to 55% of his net monthly income. So, you must calculate and assess your EMI beforehand. Consider the EMI for your new home as well as any existing EMI.
If you make a loan application after calculating your EMI, the chances of approval increase significantly. You must carefully plan each step before applying for a loan.