Reverse Mortgages

Paperwork Needed for a Reverse Loan

I actually discussed this in a previous post, but to change it up a bit and make it more interesting, I created a short video with terrific music that makes it pretty simple to understand what kind of documents are needed from a borrower.

Of course, depending on their personal situation other items might be needed, especially if the borrower is still working, then pay check stubs and W2’s would be needed and any phone numbers for management companies if the borrower lives in a Condo.

Which is always a good idea, but for whatever it’s worth here is the video.

And please….do call me if you have any questions.

 

 

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Jumbo Reverse Mortgages

If a homeowner lives in a property that is valued above 1MM and they would like to have more funds than the FHA HECM would would provide them, they could consider using a Jumbo Reverse loan as an option.

This is a non-FHA mortgage and thus becomes more affordable in the Closing Costs, because the Lender does not charge any Mortgage Insurance Premium/MIP which the FHA HECM loan does.

Given that the value of a property will be capped at $636,150 for the FHA loan, then it stands to reason if the property has considerably more value above that limit, the homeowner may want to consider using a Jumbo reverse loan instead of the FHA option.

Overall, the fees to complete the transaction are lower and just like the FHA HECM loan, there are no mortgage payments, the borrower remains on the Title   ( And in a Trust if that is applicable) and the property goes to the borrower’s estate when the last borrower passes away.

And there are no prepayment penalties if the borrower decides to repay the loan back, typically through the sale of their home.   This also applies to the FHA HECM reverse mortgage as well.

They must pass the Financial Assessment, just like they would on the FHA loan and continue to pay their on going property taxes, Homeowners insurance and any HOA fees that might be associated with the property.

This is an excellent option for anyone who has a very large amount of equity in their home and may want to retire an existing mortgage and it’s payment, have extra funds for monthly expenses or possibly medical bills and care giving costs and increase their monthly cash flow and limit the amount of “draw downs” on a retirement portfolio.

If anyone like to have the details about this loan, it would be best to contact me in that I can discuss the details with you and how you may ( or may not) benefit from it’s use.

It depends upon on each person’s personal circumstances.

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Is a Reverse Mortgage a Scam?

For many years the Reverse loan had a image problem and prior to them being placed under the auspices of HUD and FHA, they were quite terrible.   Generally the client had to buy an annuity with the funds they received and also share their equity with the “lender” and thus the terrible reputation of the loan was created.

But that is no longer true and hasn’t been the case for many years, however the image continues to linger and quite often there is a credibility problem that professionals such as myself, have to address with a potential client in regards to “what they have heard” about Reverse loans.

None of us like to be “sold” anything and we certainly need to feel comfortable with our decision when it involves something as serious as a mortgage.  And due to the confusing aspects of the loan it makes it quite challenging to explain it to someone that is considering using the option, because they may need additional funds for cost of living expenses, home improvement or leveraging a retirement saving   ( and did I say?), unplanned medical expenses.

And there is high percentage of seniors that are carrying a mortgage burden and making mortgage payments each month on what may now be a “fixed income” and are no longer employed and might be drawing down on their retirement fund  each month to pay this ongoing obligation.

The question for those of us in the industry, is how to best address the fears and concerns about the loan and also to transcend the mistrust and doubt as to whether or not they are some sort of scam.   A scam to take over the borrower’s home and then “kick them out”.

This conversation will continue in a following post.

Stayed “tuned”.

 

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Reverse Loans Improve Lives

I mentioned in my last post that quite often I am asked why people apply for a reverse loan and what are the most common reasons.

In my previous post I spoke about a client who had been using her credit cards to pay for her “cost of living” expenses, because her Social Security income was too low to get her through each month.

However, the downside to using credit cards, is eventually you use all of the credit available on them, but still have an ongoing payment that now cannot be met.

You can read about Sylvia and how we managed to eliminate that debt and give her additional money each month from a reverse mortgage in the previous post.

My next example is Bonnie and Jim   ( No last name for privacy reasons) who had had a major medical disaster destroy their lives.  Medical emergencies are probably the number one reason for causing personal financial collapse as no one is prepared for the medical expenses that come with aging.

He had a great career in the movie studios as a transportation driver and life was quite good for them until he developed diabetes.

Unfortunately like so many men, Jim ignored it and continued to eat and drink whatever he wanted and did not take care of his health.   Needless to say he became very ill and almost died resulting in the loss of both of his legs and kidneys to the disease.

He was no longer able to work and they quickly ran out of their savings to pay medical bills and their regular ongoing monthly expenses and used up all of the funds that were available on their credit cards leaving them in a terrible, crushing financial situation.

They owed the IRS money, all the credit cards and ended up doing a Chapter 13 Bankruptcy but somehow managed to continue to make their mortgage payments and ultimately repaid the money they owed to the IRS

I was referred to them by a CPA and in spite of the ugliness of their credit and the bankruptcy, I managed to get them approved for their reverse loan, relieving them of the burden of mortgage payments, plus additional funds that they were able to receive at the close of Escrow.

Making their life just a little bit better.

Jim and Bonnie are doing very well as of this writing and even though their credit had been ruined, I was still able to get them approved for their reverse loan and help them move forward and into better circumstances.

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Reverse Loan Paperwork

Reverse mortgage loan applications need the following documents from the borrower and it’s very important that they provide everything that is needed to process their loan in a timely manner.

How quickly a loan funds and closes mainly depends upon the borrower’s cooperation in providing whatever the lender as requested.

  • Copy of photo I.D.   Typically a current Driver’s License or a Passport
  • Copy of Social Security Card or a Medicare Card
  • Copy of Social Security Awards Benefit Letter.   These are mailed out each December and show how much Social Security income will be received in the following year.
  • (2) Months of checking acct statements   ( All pages) to show SS deposits or any other payments such as a pension/retirement check.
  • Most recent statement for any existing mortgage(s)
  • Copy of Homeowners Insurance Declaration Page
  • Complete copies of most recent quarterly statements for investments and or 2 months of bank statements.   All pages.
  • Copy of Trust if one is in place.    The new loan will record in the name of the Trust.
  • Name and Phone number for the management company if there is a Home Owners Association.

If the borrower is currently employed or receiving income from rental properties, the following items will also be required along with the list above this line.

  • (2) Years Federal Tax Returns – All Schedules
  • (2) Years W’2’s and any 1099’s
  • Most recent Year-to-Date Pay Stub for the previous 30 days.

Yes, I know.   It’s a lot of documentation and it’s very similar to what is needed for a traditional loan.   However, it continues to quite easy to be approved for a Reverse loan compared other mortgages.

Plus, you won’t have any payments to make on it, so don’t be intimidated by this list.

If the reader has any questions about this or anything else about Reverse loans,  please call me.   I’m here to help you through the confusion.

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