Due to some recent changes in the last year, the FHA reverse loan has lost some “traction”, due to the return of the historical MIP calculation, a reduction in the amount of funds available to the borrower, and most recently a collateral review of each applicant’s appraisal.
And if there are any concerns that the first appraisal may have been inflated, a second one will be required at a cost to the borrower and no one would like being told that they might have to pay for an additional appraisal.
This latest policy change will cause the loan processing period to possibly extend out an additional two weeks, but this will be another post for a later date.
But like the Calvery coming to the rescue, Jumbo reverse loans might very well be an ideal solution for some senior homeowners as there are more options to consider then there were in the past.
Jumbo reverse loans are less expensive than the FHA option and ideal for those properties that would be considered “high value”, such as 1MM or more and for California, that could apply to many seniors who own a home which might exceed the current HUD Lending Limit of $679,650.00.
Another name for this option is a proprietary reverse loan, meaning it’s not a government program as the FHA loan is, but is offered though investors and they work exactly like the traditional reverse mortgage.
And what are the new proprietary loans like and how similar are they to the FHA reverse loan?
I will share those details in the next post very shortly.
When I first started in the reverse loan industry over 17 years ago, there was only one loan option at the time. And it was the FHA Home Equity Conversion Mortgage, affectionally known as the HECM. It is a Line-of-Credit and remains the most popular reverse mortgage that seniors apply for.
Initially, there was one interest rate and no other choices, but now there are several different rates that a borrower can select, of course depending upon what is the most beneficial to them and their particular goals. And there are also Fixed-rate mortgages for those who may be sensitive to interest rate fluxations.
And although the FHA loan remains very popular there are additional options for the borrower to choose from, especially if their home exceeds the HUD Lending Limit that as of this writing, is $679,650.00 and they want to access more of their equity than the HECM would provide to them.
So what is the solution to this question when a home’s value is much more than the HUD Lending Limit and especially in those states such as California where the average home value is quite often above 1MM?
A Jumbo reverse loan of course. And in the last few years what started out as a single offering, has developed into several options allowing more benefits to a senior homeowner.
My next post will share some of the details about them, how they function and whether or not they are always the best choice for a senior who is considering a reverse mortgage.