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Choosing the Ideal Mortgage Products Based on Generational Differences

It may come as no surprise that the mortgage needs of a 70 year-old home buyer is different than those of a first-time home buyer in their 20s. According to an , the fact is that mortgage loan needs are different based on your age and where are you are at in your financial life.

Mortgage Loans for First-Time Buyers There are many people who are fresh out of college and in a financial position to purchase their first home. According to Jim Pomposelli, a mortgage banker with Federal Savings Bank in Chicago, there are many people in their 20s who have been responsible with their finances and, as a result, they have great credit that qualifies them for purchasing a home. But with student loans hanging over their heads and very little cash in the bank, they have trouble coming up with a down payment.

For these younger buyers, there are two types of mortgage loans that are better than others. The first type is a low down payment conventional mortgage loan. With these mortgage loans, the typical 20 percent down payment is reduced to a 5 percent down payment which helps a first-time home buyer afford the loan. The second type of mortgage product that is attractive for young buyers is one that is insured by the government, such as a VA loan or FHA loan. These loans offer financial help to those who want to purchase a home but have very little savings to put towards the purchase of the home.

Products for the 30s and 40s Generation For people who are in their 30s and 40s and already own their home, there are different mortgage products that are attractive to them. If they are not underwater on a current mortgage loans, a two-loan package may be the ideal financial move. This package is for homeowners who want to refinance their current mortgage or simply move to another home. With a two-loan package, the homeowner typically takes out a first mortgage on their current home at a low rate while also getting a home equity line of credit for financing their next home or for refinancing their current home. Generally, these homeowners have accumulated some assets and they are able to handle a higher amount of debt than the homeowners in the younger buying group.

If the homeowner in this age group is underwater on their mortgage, many of them have the option of taking advantage of the federal government’s HARP, or Home Affordable Refinance Program. The newest installment of this program designed to help troubled homeowners includes the provision of an unlimited cap on the mortgage borrower’s loan-to-value ratio.

Seniors and Retirees There is a trend among homeowners who are approaching or already in their early retirement years to refinance their long-term mortgages into a shorter term mortgage, mainly a 15-year fixed mortgage. They are using the money that they are saving on their payments each month to put add to their retirement accounts. There are also many homeowners in this age group that are looking for inexpensive “fixer uppers” at a low price so they have something to do since they are no longer in the workforce.

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