I wanted to buy my own house.
After several years full of changes in position, finances, relationships and goals, I was ready to settle down, stop renting and buying a home. I just wanted to buy something simple, in reasonable condition, but at a price I could easily manage. It meant I had to take out a mortgage.
Being a 63-year-old self-employed “aging alone”, I wasn’t sure I could make it. The pandemic has changed the real estate universe, leading to higher prices and lower inventories. However, I felt it was the right time for me: I had a good credit score, money available for a down payment, and my debt was very low.
So I started by making a list of the things I wanted in a house. I also determined a monthly payment interval that I could comfortably manage. The next step was figuring out how much I could borrow.
Applying for a loan can be confusing and intimidating. I had an idea of what I wanted in a home, but I didn’t know if I could qualify for a mortgage or how much I could afford to borrow. So the first thing I had to do was contact a loan company.
“The key with any borrower is preparation and planning,” says Valerie Saunders, board member of the National Association of Mortgage Brokers. “Talking to a mortgage broker in their area early in the process can be very helpful in providing them with available financing options, the amount of down payment needed, documentation to provide as part of the approval process, and more. “
Read also: I want to refinance my mortgage, but I’m about to turn 70. Is it wise to refinance in my life span?
Pre-qualification or pre-approval?
I’ve found that organizing my finances in advance helps me stay positive and focused. Then I was faced with a decision: Should I apply for pre-qualification or pre-approval?
“A prequalification means that the mortgage broker or mortgage lender has reviewed the financial information you provided and believes you will qualify for a loan,” says Saunders. “The estimated loan amount is based on income provided and debt reflected as part of a credit report. This estimate is subject to change based on final confirmation of the information provided.”
I decided to apply for pre-approval because I was sure I wanted to proceed with a mortgage once I found the right home. A pre-approval is a more formal offer letter that only mortgage lenders can provide. this can affect your credit score, but it is not yet a commitment from the lender for a specific amount.
“The borrower will complete a mortgage application and the lender will verify the information provided, including creditworthiness,” says Saunders.
Lenders look for a number of factors when applying for a pre-approval or mortgage, such as:
Your credit history
Your FICO credit score
Your debt-to-income ratio
Your sources of income
According to a survey by the National Association of Realtors, 61% of home buyers use their savings as a source of down payment and 56% use the proceeds from another home sale to fund the down payment. I was going to use money from an equity fund to pay the down payment on my future home.
Lily: Do you dream of growing old on the spot? This government program could be a game changer for the elderly
Unearth those documents
As I am a freelance writer and sole proprietor, I also had to present a recent profit and loss account and other proof of income. Other documents required by the loan officer included:
Copies of the last two years of my tax returns
Three months of bank statements
Statements of IRAs, equity funds, etc.
Divorce decree (to prove any asset allocations from the divorce)
I had organized most of these items in advance, but still had to research a few items. It took almost a full business day to collect all my documents, copy bank statements, then scan and send documents.
All these documents were submitted through a secure portal provided by the lending company. Then I had a phone conversation with the loan clerk, repeated a lot of what I had already presented, and answered questions about my financial health and whether I had the loan amount in mind.
Then you worry and … wait
I expected to wait a few days for a response and wondered if I would be entitled to a loan large enough to buy a house in good enough condition to move in immediately. Would they approve my application, even if my income changed from month to month? Would I start over with a higher fixer, using only the stock fund money?
Surprisingly, the answer came the next morning.
The amount I could borrow was enough to buy a home in reasonably good condition, and I felt comfortable with the estimated monthly payment on the 30-year fixed-rate loan. I had a happy dance printing the loan pre-approval.
Conventional mortgages like the one I have aren’t the only option for older buyers. If you’re 62 or older, for example, you might qualify for a reverse mortgage to purchase using the loan proceeds from a home equity conversion mortgage.
This housing and urban development loan allows you to get a reverse mortgage and buy a new home in one transaction, says Saunders. However, you still need to provide the down payment and the amount may be higher than buying a standard single-family home. You will be responsible for home insurance and property taxes, but you will not have to pay the principal balance of the loan.
Read also: I want to live outdoors all year round – dry, snowless summers – on $ 4,000 a month. Where should I retire?
Next step: finding a home
The NAR survey found that on average, buyers search for eight weeks before finding a home. With very little inventory in my area and price range, I expected my search to last at least all summer. I went to my area’s multiple classifieds service to see which homes were currently listed and active in my area. Although the lending company is affiliated with some real estate agents in my area, I have chosen to hire another agent for various reasons.
Some real estate agents train to become Senior Real Estate Specialists (SRES) “to be able to meet the special needs of mature Americans when they sell, buy, move, or refinance residential or investment properties,” according to the National Association of Realtors.
“I have worked with many seniors who are moving to be closer to family or to a home that provides the care they need now due to the changes in health,” says Barb Trousdale, SRES officer and owner / broker of Preferred Properties. in Williston, Vermont. “There is a misconception that older people cannot get mortgages. Lenders offer mortgages to buyers of any age if they have good credit and the income to support the payments.
SRES-nominated agents have undergone continuing education courses to better understand the issues facing older homeowners, such as reverse mortgages, the sale of a family home, and government programs that can help or influence a sale or purchase .
Z of the Zillow group,
The 2020 Consumer Housing Trends report found that 42% of shoppers failed to get their first offer accepted. But in my case, the stars aligned: I made an offer (several thousand dollars above the asking price) on the second home I visited and it was accepted.
I am currently working on the loan process and anticipating a closing date in a few weeks. As an independent and solo senior, I have found that buying a home is indeed possible.
Rosie Wolf Williams is a freelance writer whose work has appeared in USA Weekend, Woman’s Day, AARP the Magazine and elsewhere.
This article is reproduced with permission from NextAvenue.org© 2022 Twin Cities Public Television, Inc. All rights reserved.
More from Next Avenue: