{"id":1182536,"date":"2023-03-06T09:10:34","date_gmt":"2023-03-06T14:10:34","guid":{"rendered":"https:\/\/bugaluu.com\/news\/older-mortgage-applicants-are-more-likely-to-be-rejected-study-finds\/1182536\/"},"modified":"2023-03-06T09:10:34","modified_gmt":"2023-03-06T14:10:34","slug":"older-mortgage-applicants-are-more-likely-to-be-rejected-study-finds","status":"publish","type":"post","link":"https:\/\/bugaluu.com\/news\/older-mortgage-applicants-are-more-likely-to-be-rejected-study-finds\/1182536\/","title":{"rendered":"Older mortgage applicants are more likely to be rejected, study finds"},"content":{"rendered":"
<\/a><\/div>\n

The older you get, the weaker your chances are at getting approved for a mortgage or refinance, according to a new study.<\/p>\n

Rejection rates spiked the most after borrowers crossed 70 and were most common among men, according to a brief from the Center for Retirement Research at Boston College<\/a> that summarized a Federal Reserve Bank of Philadelphia<\/a> study analyzing 5 million single-borrower loan applications from 2018-2020.<\/p>\n

The findings are an important consideration for Americans who may need to tap their home equity later in life using a cash-out refinance or want to take advantage of better mortgage rates to get a lower monthly payment.<\/p>\n

\u201cTaken at face value, age appears to be an equally important correlate of mortgage application outcomes as race and ethnicity,\u201d Natee Amornsiripanitch, the study\u2019s author and a senior financial economist at the Philadelphia Fed, wrote in the brief. \u201cOverall, the results suggest that older individuals systematically face higher barriers to mortgage access.\u201d<\/p>\n

Mortgage rejection rates spiked the most after borrowers crossed 70 and were most common among men. (Photo: Getty Creative)<\/figcaption>
Halfpoint Images via Getty Images<\/div>\n<\/figure>\n

Borrowers are more likely to get rejected as they grow older, regardless of the type of mortgage loan they applied for, the study found. Applications for the three oldest age groups were one to three percentage points more likely to be rejected than younger borrowers.<\/p>\n

For instance, the rejection rate for mortgage applicants between the ages of 50 and 59 was 1.07 percentage points higher than those between 18 and 24. The rate was 1.54 percentage points higher for folks between 60 and 69 and 2.7 percentage points higher for applicants over 70.<\/p>\n

Overall, the rejection rate across all borrowers was 17.5%.<\/p>\n

\"(Credit:
(Credit: Natee Amornsiripanitch, 2022)<\/figcaption>
Natee Amornsiripanitch<\/div>\n<\/figure>\n

The study also found that rejection rates accelerated every year after the age of 70, spiking to 12% by the age of 90. The findings also concluded that rejection rates among women increased at a slower pace compared with men, likely because women tend to live longer.<\/p>\n

According to the study, older applicants tended to be rejected due to insufficient collateral and increased mortality risk.<\/p>\n

Insufficient collateral \u2014 meaning applicants didn\u2019t haven\u2019t enough equity on their existing property to take out the desired loan \u2014 accounted for 50% to 70% of the age-related rejections, according to the study.<\/p>\n

Borrowers had insufficient collateral when the appraised value of the property was too low compared with the requested loan amount. This impacted older applicants, who may not have the time or energy to maintain their properties relative to younger borrowers.<\/p>\n

\"(Credit:
(Credit: Natee Amornsiripanitch, 2022)<\/figcaption>
Natee Amornsiripanitch<\/div>\n<\/figure>\n

\u201cInsufficient collateral is also consistent with older applicants who are forced to carry a mortgage into retirement being more financially distressed, as they may lack the funds to pay for adequate maintenance,\u201d the study found.<\/p>\n

The second reason for rejection relates to mortality risk.<\/p>\n

The rate of rejections also significantly increased each year after the age of 70. The study noted that having a borrower die could be \u201ccostly to the lender\u201d increasing the likelihood of the loan being paid off early or entering foreclosure. This also explained why women\u2019s borrowing risk accelerated at a slower rate compared with men as they aged.<\/p>\n

Mortality risk also could play into the collateral equation.<\/p>\n

“The insufficient collateral explanation could be interpreted as lenders requiring the borrower to put up more collateral as age-related mortality risk increases,” according to the brief.<\/p>\n

According to the Consumer Financial Protection Bureau<\/a>, creditors aren\u2019t allowed to deny your loan application based on age alone.<\/p>\n

\u201cAs far as being denied due to age, that is patently illegal,” Jason Sharon, owner of Home Loans Inc<\/a>. told Yahoo Finance.\u00a0<\/p>\n

However, the study’s results don’t necessarily mean that lenders are violating fair lending legislation, the brief said, noting the results don’t prove causality. Additionally, “the regulations allow the consideration of a borrower\u2019s age in credit decisions under some circumstances.”<\/p>\n

For instance, a lender can consider an applicant\u2019s career and length of time to retirement to figure out if their income will support the mortgage payment.\u00a0<\/p>\n

“Regardless of the reason, however, it is important for older individuals to know that they are more likely to be denied credit,” the brief concluded.<\/p>\n

(Photo: Getty Creative)<\/figcaption>
Westend61 via Getty Images<\/div>\n<\/figure>\n

According to Sharon, older applicants often have better credit and equity \u2013 making it easier for them to navigate a refinance or new purchase. However, being on a fixed income can present its own set of hurdles when a lender evaluates an applicant’s debt-to-income ratio and whether additional assets will be needed as collateral.<\/p>\n

According to Sean Dycus, a real estate agent in South Carolina, some lenders may view a fixed income as a risk of defaulting down the line.<\/p>\n

\u201cMy dad’s Social Security each month is like $7,000. The bank would totally give them money for a second spot, it just depends,\u201d Dycus said. \u201cAre you one of these retirees or elderly people that have a mortgage in place already where you’re paying $1,800 a month and your [Social] Security’s only $4,000? That matrix, the numbers don’t make sense for the lender.\u201d<\/p>\n

To improve their chances of getting qualified, older applicants should talk first with a mortgage consultant to determine if their credit score needs work or if any existing equity can be converted to cash.<\/p>\n

\u201cI love older applicants,\u201d Sharon said. \u201cFixed income is so much easier to verify and calculate than any other type. Of course, if a person is living off of Social Security alone, they will not qualify. That is not what Social Security was designed to do.\u201d<\/p>\n

Gabriella is a personal finance reporter at Yahoo Finance. Follow her on Twitter <\/em>@__gabriellacruz<\/em><\/a>.<\/em><\/p>\n

Read the latest personal finance trends and news from Yahoo Finance.<\/em><\/strong><\/a><\/p>\n

Follow Yahoo Finance on <\/em><\/strong>Twitter<\/em><\/strong><\/a>, <\/em><\/strong>Instagram<\/em><\/strong><\/a>, <\/em><\/strong>YouTube<\/em><\/strong><\/a>, <\/em><\/strong>Facebook<\/em><\/strong><\/a>, <\/em><\/strong>Flipboard<\/em><\/strong><\/a>, and <\/em><\/strong>LinkedIn<\/em><\/strong><\/a>.<\/em><\/strong><\/p>\n

From:AOL<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

The older you get, the weaker your chances are at getting approved for a mortgage or refinance, according to a new study. Rejection rates spiked…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1182536","post","type-post","status-publish","format-standard","hentry","category-news","wpcat-1-id"],"_links":{"self":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1182536","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/comments?post=1182536"}],"version-history":[{"count":0,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/posts\/1182536\/revisions"}],"wp:attachment":[{"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/media?parent=1182536"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/categories?post=1182536"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bugaluu.com\/news\/wp-json\/wp\/v2\/tags?post=1182536"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}