Reverse Mortgages Could Save Foreclosures

Reverse mortgages are still safe

As Population Ages, Reverse Mortgages May Finally Catch On.

If you’re planning to get a reverse mortgage to cash in on the value of your home, there are several ways to get your money.

With basic living expenses slowly increasing mature Americans are often left wondering how they will supplement their current monthly income just to survive day-to-day.

Fortunately, the US Department of Housing and Urban Development (HUD) and the Federal Housing Authority (FHA) created a program called the Home Equity Conversion Mortgage (HECM) or reverse mortgage. The program was designed to allow mature Americans, age 62 years and older, remain in their home and use their home as equity to provide them with the additional income they need per month.

But how does the reverse mortgage program work for you? Easy. If you are a mature American and your current home is your primary residence then you may qualify for a reverse mortgage. Here are the details of the requirements of the reverse mortgage program.
• Must be at least 62 years or older.
• Your home must be your primary residence and you must own the home.
• Your home must be paid off or have a low enough balance in order to qualify for the reverse mortgage.

Now here is how the reverse mortgage program works:
First you should understand that a reverse mortgage is a loan where you borrow against the current equity in your primary residence. With a reverse mortgage you do not make payments on the loan while you reside in the home. You begin making payments once the home is no longer your primary residence.

Once you have met the requirements of the reverse mortgage program which appeals to you, and there are some various choices available, you will either receive a lump sum, monthly payments, a line of credit or a combination of all three of these forms of payments. Remember the equity in your home does not need to be paid back while the home is your primary residence. And the money from your home is yours to do with as you please. You do not have to worry about placing the money in an account you are unable to access for a specified amount of time.

You are responsible for paying your property taxes and your homeowners insurance. The only thing a reverse mortgage guarantees is that you are able to use the equity in your home for cash to either supplement your monthly income or to pay off some long standing medical or personal bills.

Just like a traditional mortgage, a reverse mortgage has closing costs which you will be required to pay. Keep in mind that some closing costs for a reverse mortgage are higher than normal but are often worth the added measure to secure your independence.

You now must meet some conditions set forth by FHA and HUD prior to applying for a reverse mortgage to ensure you fully understand the requirements of the program. Speaking with a HUD approved HECM counselor is now a mandatory requirement prior to the reverse mortgage program participation.

You will be advised and may be limited in withdrawing all of the equity from your home. Due to the new higher borrowing limits set by President Obama, your home may have more equitable value but again you may be cautioned or limited in the amount you can withdraw from your home due to the higher fees associated with a reverse mortgage. The last thing either agency wants for you to experience is being ‘house rich and cash poor’. Meaning you took out a reverse mortgage and your supplemental monthly income is still not allowing you to live the way you planned.

Reverse mortgages have been around for more than 20 years and have proven to provide mature Americans, like you, with additional income in your time of need by using the equity in your primary residence. The program offers a way to remain independent while having a more promising hope of financial stability.

Are you looking for even more information? Visit our website by clicking here.

You can also call us toll free at 888-887-6708, where a friendly and knowledgeable reverse mortgage specialist is standing by.

Top Ten Things to Know if You’re Interested in a Reverse Mortgage

1. What is a reverse mortgage?

A reverse mortgage is a special type of home loan that lets a homeowner convert a portion of the equity in his or her home into cash. The equity built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence. HUD’s reverse mortgage provides these benefits, and it is federally-insured as well.

2. Can I qualify for a HUD reverse mortgage?

To be eligible for a HUD reverse mortgage, HUD’s Federal Housing Administration (FHA) requires that the borrower is a homeowner, 62 years of age or older; own your home outright, or have a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan; and must live in the home. You are further required to receive consumer information from HUD-approved counseling sources prior to obtaining the loan. You can contact the Housing Counseling Clearinghouse on 1-800-569-4287 to obtain the name and telephone number of a HUD-approved counseling agency and a list of FHA approved lenders within your area.

3. Can I apply if I didn’t buy my present house with FHA mortgage insurance?

Yes. It doesn’t matter if you didn’t buy it with an FHA-insured mortgage. Your new HUD reverse mortgage will be a new FHA-insured mortgage loan.

4. What types of homes are eligible?

Your home must be a single family dwelling or a two-to-four unit property that you own and occupy. Townhouses, detached homes, units in condominiums and some manufactured homes are eligible. Condominiums must be FHA-approved. It is possible for individual condominiums units to qualify under the Spot Loan program.

5. What’s the difference between a reverse mortgage and a bank home equity loan?

With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow. You don’t make payments, because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes and other conventional payments like utilities, but with an FHA-insured HUD Reverse Mortgage, you cannot be foreclosed or forced to vacate your house because you “missed your mortgage payment.”

6. Can the lender take my home away if I outlive the loan?

No! You do not need to repay the loan as long as you or one of the borrowers continues to live in the house and keeps the taxes and insurance current. You can never owe more than your home’s value.

7. Will I still have an estate that I can leave to my heirs?

When you sell your home or no longer use it for your primary residence, you or your estate will repay the cash you received from the reverse mortgage, plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs. None of your other assets will be affected by HUD’s reverse mortgage loan. This debt will never be passed along to the estate or heirs.

8. How much money can I get from my home?

The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA’s mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.

9. Should I use an estate planning service to find a reverse mortgage?

I’ve been contacted by a firm that will give me the name of a lender for a “small percentage” of the loan? HUD does NOT recommend using an estate planning service, or any service that charges a fee just for referring a borrower to a lender! HUD provides this information without cost, and HUD-approved housing counseling agencies are available for free, or at minimal cost, to provide information, counseling, and free referral to a list of HUD-approved lenders. Call 1-800-569-4287, toll-free, for the name and location of a HUD-approved housing counseling agency near you.

10. How do I receive my payments?

You have five options:
1. Tenure – equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
2. Term – equal monthly payments for a fixed period of months selected.
3. Line of Credit – unscheduled payments or in installments, at times and in amounts of borrower’s choosing until the line of credit is exhausted.
4. Modified Tenure – combination of line of credit with monthly payments for as long as the borrower remains in the home.
5. Modified Term – combination of line of credit with monthly payments for a fixed period of months selected by the borrower.