Your home is the most important investment you'll ever make. As a Homeowner, it is always a good idea to periodically review your current mortgage and consider a refinance that would benefit you to cash in some of the equity for college tuition, home improvement or just to make your current financial position more comfortable.
Many experts expect sales of previously owned homes and new construction to improve to an all time high in the very near future of the market. In this case, the question will arise of which mortgage lender is the best for you.
The right lender will be informative, offer a wide array of mortgage products, personal services, and will be there from start to finish, including the closing.
|
| |
|
As reverse mortgages continue to grow in popularity, so have a range of myths about these unique loans. Let’s take a look at some of the most common misconceptions and discuss the facts.
|
Myth #1: The bank takes away OR I will lose my house
FACT: With a reverse mortgage, the borrower retains title to the home throughout the life of the reverse mortgage:
|
- The borrower cannot, as a result of the reverse mortgage, be forced out of his or her home as long as property taxes and hazard insurance are paid, the home is maintained in reason living condition, and at least one borrower resides the home as their primary residence.
- The loan must be repaid or refinanced once the last Reverse Mortgage borrower permanently moves out of the home
|
Myth #2: The home must be debt free to qualify for a reverse mortgage
FACT: Reverse mortgages convert home equity into cash. As long as there is sufficient equity in the property, the homeowner may be eligible for a reverse mortgage. In fact, many seniors use a reverse mortgage to pay off an existing mortgage in order to eliminate a required monthly mortgage payment and either take the Monthly Payments for life or cash out of the remaining balance, if any.
|
Myth #3: The bank sells the home when the reverse mortgage becomes due
FACT: The borrower is in control of the home and retains title, not the bank or lender. So while it’s common for the borrower or the heirs to sell the home to repay the loan, it’s a decision the borrower or the heirs make. The borrower’s spouse if above 62 can refi with another Reverse Mortgage, or the heirs might also refinance the home in order to repay the loan and keep possesion.
|
Myth #4: My children won’t be comfortable with me obtaining a reverse mortgage
FACT: Seniors are encouraged to talk with their children about reverse mortgages. Many baby boomers are faced with trying to plan for their retirement and pay for their children’s education. Often, the children of many seniors are happy that their parents have a financial solution available to help them live more independently and financially secure.
|
Myth #5: The borrower could end up owing more than the house is worth
FACT: Two of the great built in safeguards of reverse mortgages are that they are structured so that the borrower can never owe more than the fair market value of the home upon repayment*. In addition, HECM products are insured by the Federal Housing Administration, FHA. an arm of the U.S. Department of Housing and Urban Development (HUD).
*If the borrower or the heirs want to keep the house by refinancing the debt and paying off the reverse mortgage, the borrower or heirs must payoff the balance in full, regardless of the value of the property. If the last Reverse Mortgage borrower has moved out of the property and the property will be sold in an arm’s length transaction, the property may be sold for the fair market value and neither the borrower’s estate nor the heirs will be responsible for a deficiency balance of the Reverse Mortgage.
|
Myth #6: Reverse mortgage proceeds will impact Social Security and Medicare benefits
FACT: A reverse mortgage will generally not affect regular Social Security payments or Medicare benefits. Depending upon the borrower’s situation, a reverse mortgage may affect benefits one receives, if any, from the Federal Supplemental Security Income (SSI) program, or state-administered programs like Medicaid. It is recommended that the borrower speak with his or her financial advisor and appropriate governmental agencies.
|
Myth #7: There are restrictions on how the money is used and taxes will have to be paid on it.
FACT: Actually there are no restrictions. The cash proceeds from a reverse mortgage can be used for almost any purpose and since it’s already your money, it’s tax-free. Many seniors have used reverse mortgages to travel, pay off debts, help their kids, make a luxury purchase or just live more comfortably
|
Myth #8: Reverse mortgages are only for seniors in need, or for the ‘house rich, cash poor.’
FACT: Reverse mortgages are an excellent financial planning tool that has been used by homeowners from all walks of life to enhance their retirement years. In fact, with the new 2009 lending limit, many seniors are benefiting from increased cash benefit from a reverse mortgage.
|
| |
The best way to search the market for your mortgage lender is to network with family, friends, and professionals such as an attorney or an accountant. The best of these suggestions will come from those that have had the Reverse Mortgage purchase or refinance experience and were left with a positive impression. Other sources as The Yellow Book, local publications and the newspaper's real estate and business sections can get you started on your quest. The MOST important factor is to choose a LOCAL lender that you can sit with to have all your questions answered and participate in the entire loan process. |
During this quest, the important thing is to focus on the fundamental factor of the mortgage lender being informative and guiding you through the complex process with not only answers to your questions, but offering options from the many investors and how the options may benefit you more than the standard loan. |
Do not try to compare rates from all the people you talk to because every loan is as different as the person getting that loan. When you are making your selection through basic telephone interviews, do not give anyone your Social Security number until your lender selection is complete. No lender can quote you an accurate rate and costs until they have all the necessary information. There are many factors that affect each loan and that is why we come to the next step.
return to top |
|
The best way to search the market for your mortgage lender is to network with family, friends, and professionals such as an attorney or an accountant. The best of these suggestions will come from those that have had the purchase or refinance experience and were left with a positive impression. Other sourches as The Yellow Book, local publications and the newspaper's real estate and business sections can get you started on your quest. |
| |
During this quest, the important thing is to focus on the fundamental factor of the mortgage lender being informative and guiding you through the complex process with not only answers to your questions, but offering options from the many investors and how the options may benefit you more than the standard loan. |
| |
Do not try to compare rates from all the people you talk to because every loan is as different as the person getting that loan. When you are making your selection through basic telephone interviews, do not give anyone your Social Security number until the selection is complete. No lender can quote you an accurate rate and costs until they have all the necessary information. There are many factors that affect each loan and that is why we come to the next step.
|
|
| |
| This process is the most important step because it determines how your financial life will be lived. |
|
| Assuming you have made your lender selection, the lender will ask for you Social Security number at which time they will run a credit report to determine the level of credit, monthly payments and the payment history. Most importantly, a credit score (FICO) will be revealed that will determine which loan programs you qualify for. It is important to know that if your credit is run numerous times it will negatively affect your FICO score. |
|
| The lender will also request your taxable earnings for the previous two years, asset statement balances and the source of funds, pay stubs reflecting current salary and any other factors effecting income (disability or social security income, receiving or paying child support, etc). |
|
After all this information is calculated and explained there will be the monthly amount that we subtract the taxes and insurance.
|
|
The final balance is left to support the monthly principal and interest of a loan that you qualify for. The next calculation is to ascertain the total dollar amount you can afford to purchase a home or to refinance within the allowable Debt Ratio. |
|
This process is a simple one for the mortgage professional, but most important to the buyer. In many cases a client is qualified for much more than he or she wants for a monthly payment. After prequalifying a client, the mortgage lender and the client can decide where the client wants their monthly payment to be and then we can back into that monthly figure and finally settle on a range of a purchase price that will secure their financial stability, and not becoming house poor. This can be achieved in many ways, which brings us to the structuring of your loan. |
|
| |
There are many products in the marketplace, each designed to satisfy many circumstances.
|
| |
We have a full government package which includes FHA, VA and 203K rehab loans. There is the long term stability (fixed rate) or short term fixed (adjustable rate (ARM), and everything in between. |
| |
The short term ARM is, of course, the lowest rate and the long term fixed is a higher rate. The in between combinations are called the LIBOR 2/28, LIBOR 3/27, LIBOR 5/25 and the LIBOR 7/23. The first number is the fixed portion of the loan and the latter is the adjustable portion. The only caution is that the ARM's adjust to the market and can move upward in an unstable marketplace. |
| |
Choosing an ARM can qualify you for a higher loan amount because of the lower interest rate, but a future plan for stability may also be important. Retirement, relocation and projected period of residency are factors that would ARM loans a consideration. |
|
| |
After all is discussed and the lender program is chosen by the informed client, the application is taken and the loan process begins. |
| |
Upon signing every document is explained in full to the client's satisfaction and a Good Faith Estimate (GFE) is presented, which delineates all costs in the closing process which are extracted from the resources of the investor, title company, the government and outside services (i.e. termite inspection, survey, etc.). |
| |
The only out-of-pocket expense prior to settlement is the appraisal fee, which is paid directly to the appraiser, and only after the loan guidelines have been satisfied and the loan qualifies. It can take as little as two weeks or as long as 45 days, according to the loan program and the stipulations of the sales contract. |
| |
Remember that the mortgage that is right for you depends on several factors, such as your current financial situation, how you expect your finances to change, how long you expect to keep your home and how you can handle any change in your mortgage payments. Those decisions are the client's and to make them properly, the client must be properly informed. According to the National Association of Mortgage Brokers (NAMB), "The safety and soundness of the mortgage lending community is directly linked to the success and integrity of its home loan originations." Furthermore, mortgage brokers and bankers represent the single largest residential origination source today, emphasizing that they play a significant role in the mortgage loan process. |
| |
| In the end, the right lender will be informative, offer a wide array of mortgage products, personal services and will be there from start to finish, including the closing. After you close your loan, you may still need to work with your lender. Make sure you chose the one that is accessible, as Mr Mortgage is proud of our Post closing servicing. |
|
