The greying of the mortgage market

Castles in the Sand

As we age, there are physical restrictions on what we can achieve. Tennis may be more difficult, so we switch to pickleball; jogging is a knee killer but walking works; sleeping eight hours straight may be for teenagers but napping after lunch is one of life’s pleasures. Same with finance, adjustments may have to be made, but not totally discounted.

Federal law states under the Equal Credit Opportunity Act that discrimination in the mortgage market on the basis of age is forbidden. So, it basically doesn’t matter how old you are, in theory you can obtain a mortgage. However, the stumbling block is that most people when they’re retired have a reduction in their stream of income. This is particularly a problem for one spouse when the other passes away and their income is diminished because of reduced Social Security and/or pension income.

Nevertheless, there are programs available with more on the way where seniors can tap into their financial portfolios and combine that with other income to qualify. Typically, borrowers qualify based on monthly fixed income, pensions, Social Security, and dividend and interest withdrawals. If that isn’t enough, lenders are recommending setting up a monthly distribution from an IRA or 401(k) account. Fannie Mae rules only require lenders to calculate loans based on at least three years of monthly distributions from retirement accounts.

Finally, there is a method called “asset depreciation” that can be used to qualify, which does not require a monthly distribution but is based on a formula that assumes a monthly distribution. The formula varies with the lender but is based on a percentage of the borrower’s total portfolio being divided by the months in the term of the loan and qualifies borrowers on that basis.

The key to obtaining financing for older borrowers who may have assets but a lower income stream is to work with a mortgage broker experienced in loans for retirees. My guess is that should be a pretty easy thing to do in Florida, and these mortgage brokers may find individual lenders with programs more lenient for retirees.

Whatever your age all homeowners and future homeowners will be happy with the year-end real estate statistics from the Realtor Association of Sarasota and Manatee:

Single-family homes were up in all areas from last year. Closed sales were up 6.6%; median sale price was $316,000, up 5.2%; average sale price was $395,044, up 3.7%; month’s supply of available properties was 3.4 months, down 14.6% from last year. The year ended with 3.5% more pending sales than last year.

Condo sales were up in every area except the number of closed sales, which was down 6.1%. However, the year ended with 17.1% more pending sales for condos, so there is a lot in the pipeline that did not close in 2019. The other numbers are median sale price, $200,000, up 5%; average sale price was $241,331, up 3.4%; and the month’s supply of inventory was 3.6 months, down 10%.

Our biggest problem continues to be the lack of inventory, a seller’s market on steroids.

Age may be a state of mind, but a super good real estate market is a fact of life, and the fact is we’re in a real estate state of mind.