In my previous two posts, I discussed the new Underwriting procedures for qualifying for a Reverse loan and I don’t want anyone to become too concerned or afraid that they would not be able to get one if their income is low or they have some negative credit on their credit report.
The loan has never been Underwritten using FICO scores or “debt to income” ratios and that is still the case.
As long as you are at least 62 years of age and live in your property, you are eligible for the FHA loan that is only offered to seniors.
I don’t want to repeat myself here in this post about the documentation that the borrower will need to provide to the Loan Officer or discuss the Financial Assessment or the LESA but I want to explain how you can still be approved.
(Please look at my previous post that lists the items that you might have to provide to the Lender. Not all of them are necessary depending upon your particular sources for income, etc.)
But the borrower will need to be prepared to provide more documentation than in the past and a letter of explanation if they have any derogatory credit and or have been late on their property taxes, etc.
I have had clients who were essentially not a good risk to the Lender because they were clearly irresponsible when it came to making their obligatory housing expenses AND they had some “shaky” credit as well.
With the cooperation of my clients, I was able to write an excellent Letter of Explanation for them and they were not required to have a LESA set up for their loan.
However, a LESA can provide the client the peace of mind that their property taxes, homeowners insurance and any HOA fees will always be paid from the LESA account and with not having a mortgage payment on a reverse loan is a benefit to the borrower.
Plus, if for any reason the borrower’s income declines in the future, they will never have to worry about how to make any of their housing expenses, as the LESA account will automatically do it for them.
And they can feel secure living in their home.
Please feel free to call me if you have any questions about The Life Expectancy Set Aside and or would like to know approximately how much money you could receive from a reverse loan.