Smart Mortgage Moves for Seniors

If you’ve been wondering whether you can still qualify for a mortgage or tap into your home’s value after retirement, the short answer is: absolutely. Age doesn’t disqualify anyone from getting a home loan. That’s actually protected by law. Things that do matter are your income, your assets, and how everything adds up on paper.

The truth is that the best mortgage options for seniors depend a lot on your goals. Are you downsizing? Hoping to buy a second home near the grandkids? Need to access the equity in the home you’ve lived in for decades? Let’s take a closer look at your options. 

The best mortgage options for seniors

Here’s a quick look at the most popular (and practical) mortgage products available to older adults.

Conventional mortgage

• Perfect if you’re still working or have a strong retirement income
• Terms range from 8 to 30 years
• If your down payment is under 20%, you’ll pay private mortgage insurance (PMI)

FHA, VA, or USDA loan

• FHA loans are ideal if your credit needs a little work
• VA loans are for veterans and their spouses
• USDA loans help if you’re buying in rural areas

Cash-out refinance

• You replace your current mortgage with a new one and pocket some of your home equity in cash
• Useful for home improvements, debt consolidation, or just extra breathing room

Home equity loan or HELOC

• These are great if your home’s value has gone up and you’ve built equity
• A home equity loan gives you a lump sum with fixed payments
• A HELOC is more flexible, acting like a credit line you can tap into as needed

Reverse mortgage

• This is for folks 62 and older who own their home outright (or close to it)
• You get paid monthly by the lender, and you don’t have to repay the loan until you move out or pass away

Asset-based or bank statement loans

• If your income is low but your savings or investments are strong, some lenders will qualify you based on those assets instead of tax forms or pay stubs

You may also be interested in: Discover the Best 55+ Communities in Wake County, NC

The catch: Getting the best mortgage is mostly about income

Even though lenders can’t reject you for being older, qualifying can still be tricky, especially if you’re retired. Here’s why:

• Fixed income may stretch thinner than a salary.
• Debt-to-income ratio (DTI) can creep up, especially if you’re helping kids or grandkids financially.
• Life expectancy sometimes gets factored in, especially for long-term loans (yep, that’s a real thing).

According to the Federal Reserve Bank of Philadelphia, mortgage rejection rates increase steadily with age. A separate study from the Urban Institute found that adults 65–74 had denial rates up to 7% higher than those under 65. 

That said, it’s all about the prep work.

Want to improve your chances of getting a loan? 

Here’s what lenders look for.

1. Credit Score

620 or higher is a solid place to start for conventional loans.

For FHA loans, you may qualify with as low as 580 if you’re putting 3.5% down.

2. DTI Ratio

Ideally, keep it under 45%. You can calculate yours like this:
DTI = Total Monthly Debts ÷ Gross Monthly Income x 100

3. Income Documentation

Whether you’re working, retired, or somewhere in between, you’ll need to show proof of income. That might include:

• Social Security or pension award letters
• 401(k) or IRA statements
• Investment income (you’ll usually need two years’ worth of tax returns)
• Rental income or annuities
• Bank statements to verify consistent deposits

Real talk: Should you borrow in retirement?

It really depends on your comfort level and long-term plans. For some, a mortgage can free up cash. For others, it might feel like added stress. According to Bankrate’s 2023 Financial Wellness Survey, 40% of people say paying for housing negatively affects their mental health. That’s a big reason to make sure your loan (if you take one) supports your lifestyle and doesn’t add pressure.

What matters most is having a clear picture of your income, your needs, and your “what-ifs,” especially if one spouse depends on the other financially.

Here’s when taking out a mortgage could be a smart financial move:

• You’re still working and your income is steady
• You’re retired but can make a large down payment and afford a shorter loan term
• You want to access equity through a HELOC or reverse mortgage to fund renovations, caregiving costs, or travel

One thing to always keep in mind: while your mortgage payment may be fixed, things like insurance, taxes, and maintenance are probably going to rise. Make sure your budget can flex with the times.
The best mortgage options for seniors aren’t one-size-fits-all, so if you’re unsure where to begin, talk with someone who can walk you through it. I’m not a financial advisor, but I do specialize in real estate for the 55+ community, and I may be able to refer you to someone who can analyze your specific situation. Let me know if I can help you!