In a housing market riddled with age discrimination and mortgage challenges, this article unravels the lesser-known difficulties older individuals face when seeking homeownership. From being unfairly labeled as high-risk by banks due to age to navigating the murky waters of mortgage rates that escalate with years, we delve into the unique financial hurdles older buyers endure. Beyond the banks’ reluctance, we expose the harsh realities of obtaining a mortgage later in life, from potential probate complications if the homeowner passes away, to the unwelcome surprises that come with fixed incomes and uncertain investment returns in retirement.
Three main takeaways:
- Age-Related Discrimination in Mortgage Approval Processes.
- Financial Complexities and Higher Costs for Older Homebuyers.
- Risks and Realities of Mortgages for Retirees.
Is securing a mortgage as an older individual a protective step towards homeownership, or a risky venture fraught with legal and financial pitfalls? Join us as we unpack the trials faced by this demographic in today’s unpredictable real estate environment—what will you discover?
Is Old Age Sabotaging Your Home Buying Goals?
Where the dream of homeownership seems increasingly out of reach for many, a recent Buzzfeed article captured 25 critical issues that today’s homebuyers are grappling with, from age discrimination in mortgage approvals and restrictive lending practices to the volatile real estate market impacting property availability and affordability…
This blog series aims to take a deep dive into each of these 25 Buzzfeed issues. We’ll explore every facet of the current market conditions. Each post in the series will tackle one specific concern, providing insights, expert analysis, and practical advice to help you navigate the complexities of buying a home in today’s economic environment.
Whether you are a first-time buyer, a seasoned investor, or simply curious about the state of real estate, this series will provide perspective to help you make informed decisions.
With some of these widespread concerns laid out, let’s dive directly into one of the Buzzfeeed voices:
“My bank of 20+ years decided that despite them offering me outrageous credit cards every year no matter how often I told them to stop, I was a ‘bad risk’ for a mortgage due to being ‘older.’ The housing market is so screwed anyway that if I were to find something now that I could afford, it would be a shithole.”
—bloodwynne
Age Discrimination in Lending
Hey, bloodwynne, I want to say upfront if your bank is turning you down for a mortgage because you are old, that is illegal. The Equal Credit Opportunity Act (ECOA) prohibits lenders from discriminating against applicants based on age, race, color, religion, national origin, sex, or marital status.
That being said, older applicants are more likely to be rejected—those over the age of 62 have a nearly 30% higher likelihood of being rejected. And, if you do happen to score that mortgage, you’ll encounter increasingly higher interest rates to match your increasingly higher age.
Did you catch that though? 62? When did 62 become for me just not that old anymore?
The Probate Issue
Lenders in general are concerned you might retire before you pay off your loan, and retirees often have very different income structures relying upon investment returns compared to the youngins who are still working 9 to 5s, and investment income is considered high risk and volatile.
Another concern is, well, and there’s no easy way to say this in a polite delicate way, but your proximity to death. If you die before the full-life of the loan, the loan might go through a lengthy probate process when there are questions about the estate and inheritance. This can create several problems for the banks.
Probate sometimes takes months or years to resolve, and mortgage payments may be delayed. Banks may need to engage in legal proceedings to claim the money owed. And, if the property is not maintained during the probate process, a dilapidated property can depreciate in value. The longer a property is tied up in probate, the more exposed the bank is to market fluctuations. If the market declines, the value of the property may not cover the outstanding mortgage when it is finally possible to sell. If the heirs decide to pay off the mortgage early to settle the estate, the bank may receive the owed amount sooner than anticipated and misses out on interest payments. A mortgage in probate requires banks to allocate resources, including legal and real estate expertise. This uncertainty and resource allocation can be burdensome and costly.
The Role of Banks vs. Mortgage Brokers
But age wasn’t the only thing bloodwynne had issue with. For one, they worked with a bank instead of a mortgage broker. They may not even have known the bank was an issue.
Banks are direct lenders; they provide loans using their own funds. Because banks use their own money for the loans, regulatory requirements and risk management policies dictate rigid lending criteria. They then, on top of requiring strict lending criteria, banks typically only offer their own mortgage products, which severely limits choices for the borrower. The process from application to approval and servicing is usually handled internally, which means they’re not experts in this process as much as they are generalists.
Even if you’ve been with a bank for over 20 years, their offerings might not fully align with your current needs, especially as your financial needs can change significantly over two decades. Brokers, on the other hand, thrive by tailoring their search to your evolving financial landscape, potentially offering a smoother and more customized path to securing a mortgage. This doesn’t mean banks are a bad option, but in the ever-fluctuating realm of real estate financing, having someone who can navigate diverse and competitive mortgage products makes all the difference. And that’s why hitting up a broker is a smarter move.
Mortgage brokers act as middlemen between borrowers and lenders. They don’t lend money directly. Brokers have access to a multitude of products from various lenders, allowing them to find rates and terms that best fit the borrower’s needs. They can cater to a wider range of clients, including those with less-than-perfect credit scores, unique financial situations, or just being too old. Mortgages are all they do day in day out.
Local Broker Advantages
Let me add here too that I’ll always recommend a local broker.
A few clients back, they came to me already pre-approved by a mortgage broker somewhere in Michigan. An already pre-approved buyer who comes knocking on my door looking for a house is a motivated buyer. The other 99 percent who want to buy a house, I have to have that pre-approval conversation, have you talked to a mortgage broker?
Anyway, we were getting down to the wire on the close. The broker needed another signature and then one more signature for the same piece of paperwork my client had already signed. And then we are ghosted. After seven phone calls, and I don’t know how many emails, I finally learned my client’s mortgage broker went on vacation and no one knew who was handling my client’s loan.
On my very first real estate deal, my buyer’s needed a pre-approval letter tailored to a specific property. My clients and I stood out in the miserable cold sleet of New Hampshire, hunched under our coats all surrounding my cell phone while we spoke to our local mortgage broker. Within the hour, we had the paperwork. Later to learn he took that phone call on a golf cart in Disney World staring down the ninth hole.
First-to-Market Strategy
You want that kind of response time from your mortgage provider in this screwed up real estate market. Actually, you want that kind of response time from your Realtor as well. My work hours are normally from 10am to 7pm. Well, I really start work around 7am but I’m not normally taking phone calls before 10 because I’m doing other real estatey things. The working past 5pm allows me to act in the moment.
One of my clients globetrotted all over the world, was holed up in a hotel somewhere in India. The two of us scrolling through the multiple listing service (MLS) together. I’m in New Hampshire watching reruns of Friends or my wife has Call the Midwife on. That second, a house drops on the MLS. I reach for my phone and call my client, but the line is busy because I have an incoming call from my client and one of us has to hang up. We get a hold of each other, talk for ten minutes, and I immediately call the listing agent and schedule a tour. The listing agent says, “Um, what are you doing exactly? I just only now entered the property into the MLS.”
“Has anyone else called you yet about the property?”
“No.”
“If we put an offer in tomorrow, will you accept it?”
“What? Yes.”
“We want the earliest showing possible,” and I think we went there at 7am the next morning. My client still in India, nine hours ahead of me. I pull out my phone and I’m streaming my client through the house. I talk to the client privately for five minutes, she wants the house, I hit a button, and the listing agent has the offer. The listing agent had three other interested parties scheduled to tour the property after us, but because we were first, our offer was accepted for no other reason than being first.
Alternative Home Buying Tactics
Another buyer client of mine was beat out time and again by just a few thousand dollars. We were close so many times, so many times we almost had it!
I suggested a different tactic. I told her I’d look for off-market properties so when we did put in an offer, we wouldn’t be necessarily dealing with 1) an expert real estate negotiator on the other end and 2) more importantly we wouldn’t have zero competition because we would be the only people looking at the property.
Just earlier today sitting at Breakaway Café in Dover, I ran into a colleague from Verani Berkshire Hathaway who said she hosted an open house in Somersworth where over fifty people toured the home and she took in twenty potential written offers. People keep saying the market is changing, the market is going to crash and in some local markets, sure that might be true, but New Hampshire, like most of the U.S., we’re still experiencing a housing shortage. People are frantically desperate for homes. She said the market was so screwy, it wasn’t even the financials that mattered the most, but negotiating on terms.
Terms like appraisal gaps and waivers, no home inspections, quick closings—just the little tricks to make your offer look better. As per a real-life example, the winning buyer on one of my houses was financed through a traditional mortgage where the second best offer came in with an all cash offer but a ton of not unreasonable to ask for inspections. There were multiple reasons why we accepted the offer we did accept, but how the buyer was financing the purchase was not amongst our concerns.
When hiring a Realtor to help purchase your home, you have to ask the question: “What’s your strategy for overcoming the market hurdles to help me reach my goal?”
If the real estate agent can’t answer that question, go interview another real estate agent.
Hire someone with a plan.
55+ Communities
The last issue bloodwynne had was how much of a shithole the house would be for what they could afford. We spoke a little bit about renovations in the first blog post in this series. But the advice I’d give to someone younger as opposed to a senior citizen is quite different. At 62 maybe you are up for a renovation like I suggested in the first blog post; 62 is not that old. Except, of course, to a bank. Maybe you are 78 and the last thing you want is a home renovation in your life.
I like condos because in the right condo you don’t have to shovel the snow, repair the roof, replace sidewalks but you do have to deal with HOAs—see blog post number 2: Is the HOA worth the hassle? Additionally, consider 55+ communities.
Maybe you already have enough friends, but one of the significant advantages of 55+ communities is the built-in social network they offer. Residents are at a similar stage in life, leading to natural social connections through clubs, activities, and planned social events. As with condos in general, these communities often take care of landscaping, exterior maintenance, and sometimes even interior maintenance tasks. This can be a huge plus for those looking to enjoy their retirement years without the burden of home upkeep. Many 55+ communities offer extensive amenities, such as fitness centers, pools, craft rooms, and even golf courses or other recreational areas. And, where are the kids? I mean, I love my kids, but I’m also biting at the chomp to get them out of the house (they are so very close). A 55+ communities are exclusive to adults beyond a certain age threshold. Maybe you’ll see a few of your neighbors’ grandkids here and there that you can yell at to stay off the lawn.
According to Amy Legate-Wolfe for Barchart, “It’s worth pointing out that these 55+ communities generally have a limited buyer pool due to the age restrictions […]. This can impact pricing in a positive way, since limiting qualified buyers to those 55 and over typically dampens demand, which brings the price down. It’s not a guarantee of cheap 55+ housing, though; competition can still be fierce for homes in the most in-demand exclusive communities.”
Additionally, those amenities we mentioned above, the more club houses you have, the more golf carts and planned activities, the more services you have, the higher the HOA will be.
To really nail down the best choice for your golden years, consider what lights you up. Are you itching to mingle and stay spry? What’s your budget for the must-haves at home versus the perks a 55+ community dangles? Take a hard look at your lifestyle preferences. If you’re all about doing your own thing, a community-centric spot might cramp your style. But if you’re game for a vibrant, scheduled life among peers, a 55+ community could hit the spot.
The smart move really? Deep dive into your personal scenario and crunch numbers. Chatting with a financial advisor wouldn’t hurt either. Weighing the ups, downs, and your finances will help you pinpoint the perfect home setup.
How to Opt-Out of Credit Offers
And oh. All those credit card offers you keep getting?
You can opt-out of pre-screened credit offers by visiting the official Consumer Credit Reporting Industry website or calling their opt-out phone service.
Here’s how to do it:
1. Go to the website OptOutPrescreen.com, which is the official site hosted by the major credit bureaus to allow consumers to opt-out of pre-approved credit offers. You can choose to opt out for five years or permanently. The online form is quick and will require some basic personal information (like your name, Social Security number, and date of birth) to process your request.
2. Call 1-888-5-OPT-OUT (1-888-567-8688) to opt out by phone. Similar to the online form, you’ll need to provide some personal details over the phone. This service will also allow you to choose a five-year opt-out or permanent.
3. If you prefer to mail in your opt-out request, you can download and print a form from OptOutPrescreen.com and send it to the address provided on the form.
Opting out will stop most credit card and insurance offers. But opting out doesn’t affect your credit score or prevent you from receiving credit card offers altogether—banks or financial institutions you have relationships with might still send those offers.
You know what though? Those credit card applications in my house slip into the recycle bin pretty easily.
