Sunday, October 11, 2015

Aged crippled by home mortgage process

 Photo by Ulflarsen--Senior clients
Carol Forsloff--The mortgage process has been made more difficult in general following the economic stresses that helped to create the downturn of housing values during the most recent recession.  However, the mortgage process is even more of a problem in aging given the fact seniors often differ in how income is calculated and how the issues of time and circumstance are unique for the elderly..

A mortgage broker sees the age on the application.  There is an immediate curiosity when a senior applies for a mortgage.  The older the senior may be, the more apt there are errors in judgment, status and the details that make a difference in the elderly borrowers.

Decades ago mortgages were processed by lenders with an application that showed a financial inventory of assets and liabilities, self-constructed by the applicant.  It was this summary that formed the basis for decision-making, after verification information that was less extensive given the sources of income and liabilities may be more diverse in the era of technology.

VA loans are among the many that are particularly cumbersome and often problematic for the elderly. Again many of the issues related to sources of income and assets.  Some of the concerns can be particularly stressful because the kind of verification process presumes knowledge of the various individuals outside of the applicant who are involved in that process layers down. The fact the applicant can bundle closing costs and down payment offer opportunities for seniors who have been in the military to purchase a suitable home that may be necessary or especially desirable for the elderly with less house and yard to maintain.

The problem with loans from the Veterans Administration (VA) also may come during the final stages of the loan when an explanation may be especially a problem if the senior has another home that may be paid off, therefore a major asset, that the elderly applicant is keeping as income by renting or to pass along to heirs.

The problem becomes the mortgage broker's practices may not include the senior whose tax statements may not reflect assets and liabilities given the fact many seniors and others have savings that could be used to pay off much if not all of a mortgage.  Yet they may choose not to given certain estate issues along with the needs and wishes of the applicant and his or her family.

The broker, not seeing the usual documentation received by someone with a salary, or income used outside of savings that are not reflected on tax returns, is more likely to make major errors in determining qualification for loans.  The concepts used in the kind of financial statements once required by lenders and from which decisions were made is lost in the bureaucratic snafus.  Add to that any prejudgment or misconceptions by one of those involved in approving a loan, and the senior is left with a far more complicated process than necessary and potentially the refusal of a loan.

Besides the paper work errors and misconceptions about the elderly, or the requirements of a loan that may not reflect a senior's situation and information, the entire mortgage process can take more time for them than for other applicants.

There is also the possible assumption that asks the question: why does the senior need to borrow and why do they not pay in cash, as some others often do.  Again the reasons are often personal and may be because of estate planning needs, the need to maintain other property as income or the applicant's concerns about future health care costs that increase during advancing age.

An example may illustrate some of these issues.  A couple with net assets of $625,000 nearly is refused a loan because of tax statements that allowed deductions for medical expenses that were short term and other unique expenses during the two years prior to the application.  During that time two years, and to the date of the application, the elderly couple had substantial savings to augment income that could pay the requested $150,000 loan in full.  Still loan administrators continued to labor over income sources because of the income limitations on the application.

The elderly are among those who have been bankrupted by poor decision-making, or who have health problems and other issues.  It might be sad that the more streamlined the process of buying and selling a home can be, by using thoughtful measures applied to elderly groups whose needs are different than others the less strenuous and stressful the results might be and the more likely they will be just. .    Ulflarsen ,

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