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Is There an Age Limit for Getting a Mortgage?

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Becoming a homeowner is often seen as one of the most universal signs of personal financial achievement, no matter what your age. While, technically, there is no age limit for getting a traditional mortgage, there are some age-related homebuying guidelines you should keep in mind.

How old is too old to get a mortgage?

Because a mortgage is a legally binding contract that allows you to finance the cost of a home over a long period of time, some people might wonder if there are age limits involved. For example, if you’re 75, could a lender refuse to let you take out a 30-year mortgage? After all, the average life expectancy in the United States is 78.6, according to the Centers for Disease Control and Prevention.

The good news for seniors who are looking to buy a house is that it is against the law for a mortgage lender to discriminate against you based on age. The Equal Credit Opportunity Act (ECOA), which came out of the Civil Rights Act of 1964, says lenders cannot deny you credit based on age, as well as other criteria like race, color, religion, national origin, sex or marital status. The Fair Housing Act of 1968 adds even further protections, specifically stating that it’s against the law to discriminate in any residential real estate transaction.

However, there are some instances in which a lender could consider a lendee’s age indirectly. A lender may look at whether you are close to retirement age and make a decision based on your having enough income to handle the loan, according to the Consumer Financial Protection Bureau. But again, in this instance, the disqualifying factor is not your age but rather your ability to manage loan payments.

How young is too young to get a mortgage?

Can age be a discouraging factor when it comes to getting a mortgage if you’re closer to high school graduation age than retirement?

Lenders can’t deny a mortgage application solely because of your age, but states do have laws that determine the age at which a contract can be negotiated. For example, in Virginia, you must be 18 to enter into a legally binding contract, which would include a mortgage.

Your age may also affect your ability to meet other requirements for being approved for a mortgage loan.

  • Lenders evaluate your income to see that you have enough to make the mortgage payments. If you’re under 18 or even in your early 20s, it’s unlikely that you’ll have a job in which you make enough to take on a mortgage.
  • Lenders also typically require you to have a certain credit score. For example, the minimum credit score needed to take out a Federal Housing Administration (FHA) loan is 500. Yet 62 million Americans have what’s known as a thin credit file, meaning they don’t have enough of a credit history to generate a credit score. Young people who haven’t had time to build a credit history by using credit cards or taking out loans are likely to fall in this category. If you don’t have a credit score, it may be very difficult to get approved for a mortgage.
  • Finally, homebuyers typically need to make a down payment. For example, FHA loans require a minimum 3.5% down payment. For a $200,000 house, that’s $7,000. Many young people might find it challenging to come up with that amount or more.

Some people who wouldn’t otherwise qualify for a mortgage look to a cosigner to help them get approved. A cosigner basically agrees to pay the debt if you are unable to pay. Having a cosigner with good credit could increase a young person’s chances of getting a mortgage loan if he or she is old enough to enter into a legally binding contract.

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The risks of taking out a mortgage at an older age

Just because you can legally take out a mortgage at any age, doesn’t mean it’s always be the wisest move. A mortgage is a long-term commitment, and you want to make sure you’re ready for it. If you’re a senior and thinking about taking out a mortgage, consider the following risks.

  • Mortgage debt can hamper your day-to-day finances. When people retire, they typically live on a fixed income. There are no more promotions to look forward to, or year-end bonuses to give your finances a boost. Some seniors may find it challenging to make those mortgage payments month after month, along with their other expenses on a fixed income. If a financial crisis hits, they could experience a financial disaster. The Consumer Financial Protection Bureau points out that this did, in fact, happen during the Great Recession of 2007-09. Many older homeowners struggled to pay their mortgages and eventually foreclosed on their homes.
  • Unexpected repairs can throw your budget for a loop. Your mortgage payment isn’t the only thing you’d have to worry about. Most homeowners at some point experience the sticker shock that comes with appliance replacements and major repairs. If you’re living on a fixed income, replacing a roof or buying a new furnace may be too much to handle on top of the regular costs of homeownership. Also keep in mind that if you’re handy around the house and have been able to do your own repairs, you might not be able to do as much physical work as you age. In that case, you’d likely have to pay someone to do the jobs you used to be able to do.
  • You’ll likely have less time to build equity. One reason people buy real estate is so they will have something to pass down to their heirs. If you buy a house at an older age, there’s a higher chance you won’t live in the house long enough to build a lot of equity. In that case, if you die and your house is left to heirs who want to sell it, there may not be much of an inheritance for them to split.

Which mortgage products have age limits?

While age alone can’t stop you from becoming a homeowner, there is one type of mortgage product where age is a qualifying factor: a reverse mortgage. A reverse mortgage allows you to access the equity in your home. Instead of the borrower making a monthly mortgage payment, the interest is added to the amount you borrow. Over time, the balance you owe on the house rises, while the amount of equity you have decreases. You can learn more about how reverse mortgages work here.

Typically, the loan becomes due when the borrower dies, sells the house or moves out permanently. In some cases, the loan may be due sooner if the borrower fails to pay real estate taxes or insurance, or make necessary repairs.

Why would someone want a mortgage product that creates a larger balance over time? Many seniors use them to pay for retirement expenses.

The most common type of reverse mortgage is called a Home Equity Conversion Mortgage (HECM). HECMs are backed by the U.S. Department of Housing and Urban Development, and they are federally insured.

Because reverse mortgages are intended to help seniors use their equity to stay in their homes and live better in retirement, there is an age requirement. In order to qualify for an HECM reverse mortgage, at least one borrower must be 62 or older. Other requirements for reverse mortgages include:

  • You must own the house and have equity.
  • The house must be your primary residence.
  • You must have enough income to pay for taxes and insurance on the house.

If you are not 62 but your spouse is, he or she might qualify for a reverse mortgage, but because of your age, you would not be able to qualify as a co-borrower. If that’s the case, you may have to move out if the borrower dies, unless you qualify as an “eligible non-borrowing spouse.” To qualify, you would have to have been married to the borrower when the loan closed, the home must be your principal residence and you must be named a non-borrowing spouse on the loan’s documents.

The bottom line

Age plays a role in many of our biggest decisions. Whether we’re thinking about marriage, starting a business or retirement, we often consider whether the timing is right to pursue these goals. While age can’t legally deter you from buying a house, you should always weigh the pros and cons of buying a house at a particular time in your life. For seniors who are 62 or older, homeownership can present other opportunities, such as the ability to take out a reverse mortgage. Before making any decision, make sure you have a good understanding of all of your options. If you are considering buying a home, you can check your mortgage rates here.

This article contains links to LendingTree, our parent company.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Tamara Holmes
Tamara Holmes |

Tamara Holmes is a writer at MagnifyMoney. You can email Tamara here

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2019 FHA Loan Limits in Alabama

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Federal Housing Administration (FHA) loans are sought after by many homebuyers — and for good reason. Not only do FHA loans come with low down payments and closing costs, but you may be able to be approved for an FHA loan even if you don’t have stellar credit.

However, the FHA sets limits on how much you can borrow under the program, and that amount varies depending on where you live. Those limits change every year based on current home prices. The National Housing Act requires that the FHA look to median house prices in a given region when coming up with the limits for FHA loans.

In the state of Alabama, the mortgage limits for a single-family house in 2019 range from $314,827 to $331,200. Most of the state is considered a low-cost area, so the limit is $314,827. However, three counties — Hale, Pickens and Tuscaloosa — have the higher $331,200 limit, indicating that in those areas, median house prices are slightly higher.

In fiscal year 2016, the most recent time period for which this data is available, 19,050 FHA loans were issued in Alabama for single-family houses. Those loans were worth approximately $2.7 billion. Of the loans that originated in Alabama in 2015, more than a quarter — 26.7% — were FHA loans. Alabama accounted for 1.6% of nationwide FHA loans in 2018.

Alabama FHA Loan Limits by County

County NameOne-FamilyTwo-FamilyThree-FamilyFour-FamilyMedian Sale Price
AUTAUGA$314,827 $403,125 $487,250 $605,525 $152,000
BALDWIN$314,827 $403,125 $487,250 $605,525 $184,000
BARBOUR$314,827 $403,125 $487,250 $605,525 $96,000
BIBB$314,827 $403,125 $487,250 $605,525 $200,000
BLOUNT$314,827 $403,125 $487,250 $605,525 $200,000
BULLOCK$314,827 $403,125 $487,250 $605,525 $73,000
BUTLER$314,827 $403,125 $487,250 $605,525 $89,000
CALHOUN$314,827 $403,125 $487,250 $605,525 $111,000
CHAMBERS$314,827 $403,125 $487,250 $605,525 $46,000
CHEROKEE$314,827 $403,125 $487,250 $605,525 $120,000
CHILTON$314,827 $403,125 $487,250 $605,525 $200,000
CHOCTAW$314,827 $403,125 $487,250 $605,525 $69,000
CLARKE$314,827 $403,125 $487,250 $605,525 $92,000
CLAY$314,827 $403,125 $487,250 $605,525 $62,000
CLEBURNE$314,827 $403,125 $487,250 $605,525 $115,000
COFFEE$314,827 $403,125 $487,250 $605,525 $110,000
COLBERT$314,827 $403,125 $487,250 $605,525 $131,000
CONECUH$314,827 $403,125 $487,250 $605,525 $77,000
COOSA$314,827 $403,125 $487,250 $605,525 $86,000
COVINGTON$314,827 $403,125 $487,250 $605,525 $69,000
CRENSHAW$314,827 $403,125 $487,250 $605,525 $83,000
CULLMAN$314,827 $403,125 $487,250 $605,525 $100,000
DALE$314,827 $403,125 $487,250 $605,525 $73,000
DALLAS$314,827 $403,125 $487,250 $605,525 $86,000
DEKALB$314,827 $403,125 $487,250 $605,525 $106,000
ELMORE$314,827 $403,125 $487,250 $605,525 $152,000
ESCAMBIA$314,827 $403,125 $487,250 $605,525 $100,000
ETOWAH$314,827 $403,125 $487,250 $605,525 $105,000
FAYETTE$314,827 $403,125 $487,250 $605,525 $82,000
FRANKLIN$314,827 $403,125 $487,250 $605,525 $65,000
GENEVA$314,827 $403,125 $487,250 $605,525 $125,000
GREENE$314,827 $403,125 $487,250 $605,525 $73,000
HALE$331,200 $424,000 $512,500 $636,900 $162,000
HENRY$314,827 $403,125 $487,250 $605,525 $125,000
HOUSTON$314,827 $403,125 $487,250 $605,525 $125,000
JACKSON$314,827 $403,125 $487,250 $605,525 $111,000
JEFFERSON$314,827 $403,125 $487,250 $605,525 $200,000
LAMAR$314,827 $403,125 $487,250 $605,525 $76,000
LAUDERDALE$314,827 $403,125 $487,250 $605,525 $131,000
LAWRENCE$314,827 $403,125 $487,250 $605,525 $112,000
LEE$314,827 $403,125 $487,250 $605,525 $172,000
LIMESTONE$314,827 $403,125 $487,250 $605,525 $167,000
LOWNDES$314,827 $403,125 $487,250 $605,525 $152,000
MACON$314,827 $403,125 $487,250 $605,525 $82,000
MADISON$314,827 $403,125 $487,250 $605,525 $167,000
MARENGO$314,827 $403,125 $487,250 $605,525 $94,000
MARION$314,827 $403,125 $487,250 $605,525 $91,000
MARSHALL$314,827 $403,125 $487,250 $605,525 $92,000
MOBILE$314,827 $403,125 $487,250 $605,525 $73,000
MONROE$314,827 $403,125 $487,250 $605,525 $56,000
MONTGOMERY$314,827 $403,125 $487,250 $605,525 $152,000
MORGAN$314,827 $403,125 $487,250 $605,525 $112,000
PERRY$314,827 $403,125 $487,250 $605,525 $79,000
PICKENS$331,200 $424,000 $512,500 $636,900 $162,000
PIKE$314,827 $403,125 $487,250 $605,525 $109,000
RANDOLPH$314,827 $403,125 $487,250 $605,525 $91,000
RUSSELL$314,827 $403,125 $487,250 $605,525 $213,000
SHELBY$314,827 $403,125 $487,250 $605,525 $200,000
ST. CLAIR$314,827 $403,125 $487,250 $605,525 $200,000
SUMTER$314,827 $403,125 $487,250 $605,525 $78,000
TALLADEGA$314,827 $403,125 $487,250 $605,525 $86,000
TALLAPOOSA$314,827 $403,125 $487,250 $605,525 $112,000
TUSCALOOSA$331,200 $424,000 $512,500 $636,900 $162,000
WALKER$314,827 $403,125 $487,250 $605,525 $200,000
WASHINGTON$314,827 $403,125 $487,250 $605,525 $87,000
WILCOX$314,827 $403,125 $487,250 $605,525 $87,000
WINSTON$314,827 $403,125 $487,250 $605,525 $68,000
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How are FHA loan limits calculated?

FHA loans are not conforming loans — loans that meet the standards to be bought by Fannie Mae and Freddie Mac. But the FHA sets its loan limits each year based on the conforming loan limit — the largest mortgage Fannie and Freddie will purchase in a given year. In 2019, the conforming loan limit is $484,350.

The FHA “floor” refers to the largest mortgage the agency will insure in most of the country and is set at 65% of the conforming loan limit, or $314,827 for 2019.

The FHA “ceiling” is used to calculate loan limits for high-cost areas. It is set at 150% of the conforming loan limit, or $726,525, in 2019. This is generally the highest mortgage the FHA will insure for a single-family home, though there are some exceptions. In some parts of the country, loan limits fall somewhere between the FHA floor and ceiling. For example, in Alabama, three counties have loan limits of $331,200.

Are you eligible for an FHA loan in Alabama?

If the properties you’re interested in fall within the FHA loan limits and you think an FHA loan would be a good option for you, it’s time to find out whether you meet the other criteria. Find out the income and credit requirements and how to shop for a loan in MagnifyMoney’s guide to FHA loans.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Tamara Holmes
Tamara Holmes |

Tamara Holmes is a writer at MagnifyMoney. You can email Tamara here

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Alabama First-Time Homebuyer Programs

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Intro

If you’re into college football or barbecue, or just looking for a place with Southern charm, the state of Alabama likely has something that will make you smile. Alabama may also be a great place to put down roots if you’re planning to buy your first home. The state offers many programs that can save you money from the day you close on your house to the day you finish paying off your mortgage.

Many first-time homebuyers struggle to come up with enough money to make a down payment. Alabama homebuyer programs not only help first-time homebuyers come up with down payment money, but they also provide a source of funding for closing costs. The state also has a program that offers tax incentives that can make homeownership more affordable for as long as you’re making mortgage payments on the house.

In February 2019, we researched resources for first-time homebuyers who are residents of the state of Alabama. Before you start searching for a real estate agent, here’s what you need to know.

Alabama first-time homebuyer programs

The Alabama Legislature established the Alabama Housing Finance Authority, or AHFA, in 1980 with the mission of helping Alabamians with low and moderate income gain access to housing. The agency has helped more than 70,000 Alabama residents buy a house, whether they were first-time homebuyers or repeat buyers looking to trade up to a home that better served their needs.

If you want to join their ranks, take the time to familiarize yourself with AHFA programs that can help you achieve that goal. To qualify for assistance from the AHFA, you must buy a property in Alabama, and the house must be your primary residence. Other requirements vary depending on the program.

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Step Up

Step Up is a program designed to help first-time homebuyers and repeat homebuyers come up with down payment funds. The program lets borrowers take out a 10-year second mortgage that will cover the cost of the down payment. Since this second mortgage is taken out on top of the 30-year fixed-rate first mortgage, you would be technically taking out two loans.

However, the company that services the loan, or collects the payments, is ServiSolutions, which is a division of the AHFA. ServiSolutions allows borrowers to make a single mortgage payment to cover both loans, which can save borrowers some hassle every month. The Step Up program can only be used with Housing Finance Agency (HFA) loans, which are mortgage products offered by state housing finance agencies.

Features

The Step Up program offers:

  • 10-year second mortgage.
  • 3% down payment assistance.

Eligibility

To qualify for the program, you must:

How it works

Since the AHFA doesn’t offer loans itself, you must contact one of the lenders in Alabama that participates in the program if you want to apply.

The lender will check your income and credit qualifications to make sure you’re eligible and guide you through the application process. You’ll also have to complete your homeownership education requirements.

Learn more

Affordable Income Subsidy Grant

Not only is it difficult for some first-time homebuyers to come up with a down payment, but it can be challenging to find money for closing costs, too. The Affordable Income Subsidy Grant gives eligible homebuyers in Alabama a grant of either $1,500 or $2,500 that can be used to cover some of those fees.

Your income determines the amount you get compared to the Area Median Income (AMI), which varies by county and is determined by Freddie Mac. You can check to see what limits apply to your county here. To qualify for the grant, you must apply for a specific Freddie Mac mortgage offering called the Freddie Mac Home Possible Advantage conventional loan.

Features

The Affordable Income Subsidy Grant offers:

  • Closing cost assistance in the form of a grant, which means the money does not have to be repaid.
  • $2,500 if your income is at or below 50% of the Area Median Income.
  • $1,500 if your income is between 50.01% and 80% of AMI limits.

Eligibility

To qualify for the Affordable Income Subsidy Grant, you must:

  • Apply for and be approved for a Home Possible Advantage conventional loan.
  • Have a credit score of at least 620.
  • Have a DTI of 45% or lower.
  • Complete a course on homeownership.

How it works

Before you can apply for the Affordable Income Subsidy Grant you must first apply and be approved for a Home Possible Advantage conventional loan. Home Possible Advantage loans let you make down payments of as little as 3%. They also require no reserves, so you don’t need as much money at closing as some other mortgage loan products.

To get started, contact a participating lender. They’ll check your credit to make sure you meet the requirements. Your lender will also check your income to determine how much of an Affordable Income Subsidy Grant you would qualify for.

Learn more

Mortgage Credit Certificates

The Mortgage Credit Certificate (MCC) program lets you save money in another way. With an MCC, you can get a federal tax credit based on the amount of mortgage interest you paid in a particular year. Depending on your tax situation, that can make a big difference when tax day rolls around. While the program won’t save you money on the day that you close on your house, it could save you money every year that you’re still making mortgage payments on the original loan.

Features

With the Mortgage Credit Certificate program, borrowers get:

  • A 20% MCC with no cap if the mortgage loan is for $150,001 or higher.
  • A 30% MCC with a $2,000-a-year cap if the mortgage loan is between $100,001 and $150,000.
  • A 50% MCC with a $2,000-a-year cap if the mortgage loan is for $100,000 or less.

Eligibility

To qualify for the Mortgage Credit Certificate program, you must:

  • Apply and be approved for one of the following types of loans: conventional fixed-rate, Federal Housing Administration (FHA), Veterans Administration (VA), USDA Rural Development, or a privately insured mortgage.
  • Meet income limits established by the U.S. Department of Housing and Urban Development. Income limits vary by county and whether the area is designated a target area, which is an economically disadvantaged region. Your lender can tell you whether the address you’re considering is in a target area.
  • Meet sales price limits that were established by the IRS. In target areas, the cost of the house can’t exceed $331,423. In non-target areas, it can’t exceed $271,165.

How it works

To qualify for an MCC, you must apply through one of the program’s participating lenders. However, be aware that lenders accept applications on a first-come, first-served basis.

A tax professional can help you make sure the credit is applied correctly when you file your tax return. Generally speaking, the credit reduces the amount in federal taxes that you have to pay by a percentage of your paid mortgage interest. Then, you can still claim the rest of the mortgage interest that you paid that year as a mortgage interest deduction.

Learn more

National first-time homebuyer programs

One of the best things about Alabama first-time homebuyer programs is that they can be used together. For example, you could use the Step Up program and the Affordable Income Subsidy Grant to help pay your down payment and closing costs. Then you could use the Mortgage Credit Certificate program to get a break on your taxes.

While this is good news to Alabamians who are in the market for their first house, the better news is that there are still other options that might be helpful. See LendingTree’s guide to national first-time homebuyer programs, which you can take advantage of no matter where you live. Homeownership should be accessible to as many Americans as possible, and state and federal agencies are doing their part to make sure that it is.

This article contains links to LendingTree, our parent company.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Tamara Holmes
Tamara Holmes |

Tamara Holmes is a writer at MagnifyMoney. You can email Tamara here

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