Credit Challenged Seniors

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An elderly buddy of mine many times lamented the fact he was a credit ghost. He was an incurable bachelor afraid of the financial responsibilities of marrying and raising a family. So he was able to retire around age 50 to a comfortable and stress free life.

He did not believe in credit cards either writing checks or paying cash for everything. The problem with this financial decision is that he was not building up a credit history with credit card payments, car payments, or home mortgage payments since he was a renter.

The result of either writing a check or paying cash for all his purchases is he had NO credit score and could not qualify for a loan when it came time to finance the purchase of a new car after his old clunker broke down!

My friend despite his ability to take care of himself and live a nice life was “credit challenged” which did not impact him too much as he lived austerely renting a cheap apartment.

However, many senior who live higher on the hog are also credit challenged(a euphemism for having a low credit score). This means that even if they qualify for a loan, it will be at a high interest rate.

Enter reverse mortgages which is essentially borrowing against the market value of your home. To qualify for a reverse mortgage loan, a borrower has to pay a much as  2% of their home value for  loan origination fee before they get a penny. So if you have a $150,000  home, you have to pay the lender $3,000 before you start receiving your monthly payments! How about that for transforming from credit challenged to cash challenged at the speed of light.

So be cautious about the FHA insured Mortgage email solicitations, like the the one you see below, you receive that promise you will maintain ownership of your home. You will still have to pay homeowners insurance, property tax, and keep your home well maintained as your equity in your home rapidly decreases!

Credit Ghost Tribulations


 

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