costs of a reverse loan

April 11, 2019 Fees No Comments

Reverse Loans Are Expensive

Many people and professionals are under the impression that the costs and fees associated with a reverse loan are very expensive and there is some truth to that belief and because of that belief, will not consider meeting with a qualified loan consultant to get the details.

Because there is more to consider and although initially, the loan is more expensive, over the years it becomes more affordable and could be the ideal solution for a senior who wishes to remain in their home and have some financial stability.

Whether or not the mortgage is a traditional loan or a reverse mortgage, they have similar fees with the exception of the IMIP fee that is charged on all FHA loans, including those where payments are made by the borrowers.

All mortgages have fees such as the following:

Escrow
Appraisal
Title Insurance
Loan Processing
Credit Report
Points/Origination Fee
Recording Fees
Notary Fee
Lender “Junk” fees

Reverse loans have some of the same fees with the exception of the following:

No Processing Fee
No Lender “Junk fee”
Attorney review of Living Trust fee for the borrower
Initial Mortgage Insurance Premium.

All fees on a reverse loan are well regulated by the federal government and that applies to traditional mortgages as well and cannot be changed after the initial disclosure to the loan client unless there has been a “change in circumstances” in reference to the appraisal of the property or the payoff information for an existing mortgage on the subject property.

See what my clients are saying!

I will go into this in more detail in my next post and will explain why reverse loans are more expensive in their Closing Costs.

This is due to the initial Mortgage insurance Premium charged by FHA on each loan.

May 22, 2018 Buying a Home No Comments

Reverse Loans and Second Homes

A reverse loan has more than just one use for a homeowner other than refinancing their residence and it’s beneficial to know that funds from the loan can be used to purchase a property.

Most senior homeowners and Realtors are unaware of this option and could be using it to “downsize” into a smaller property or to purchase the “dream” home a senior may wish to buy in a 55+ community or move to an area of the country that they have always wanted to live in.

Another terrific option is to purchase a Vacation home.

Everyone often dreams about having a cabin, a beach house, a home on a lake or some other wonderful property that allows them to enjoy themselves and have fun and quite often, make it a family destination for vacations and family reunions.

If qualifying for mortgage payments using income and credit isn’t realistic on a second property isn’t possible, why not use the equity in one’s residence to complete the purchase and possibly pay “all in cash” for the dream home and not have payments on it, and no payments on the reverse loan because they are not required.

How perfect is that? Two homes without mortgage payments.

How is this possible you are thinking? Contact me to find out and possibly acquire that vacation home you have always wanted.

April 19, 2018 Bankruptcy No Comments

Reverse Loans and Bad Credit

In general having derogatory credit is less of an issue for being approved on a reverse loan than it would be on traditional financing.

The reverse loan applicant does undergo some “light” credit Underwriting to determine their residual income after all housing obligations are paid and this would also include any revolving or installment debts as well.

The underwriting process is referred to in the industry as the Financial Assessment and was put into place within the last few years, providing an overview of the borrowers financial capacity and willingness to continue making any on going payment obligations after the reverse loan has funded and closed.

FICO scores are not used to determine an individual eligibility for the loan, but if there are any late payments on an existing mortgage and other obligations, a letter of explanation must be provided along with the necessary documentation to support it.

But what if one had had a bankruptcy? Can they still be approved for the loan or not? The short answer is “yes”.

Chapter 7 Bankruptcies must be dismissed or discharged prior to closing the new loan. If it was dismissed over one year ago, no additional documentation is required.

But if it was less than one year, the borrower must provide a court order signed by the judge as proof of the discharge or dismissal along with the discharge schedule.

Chapter 13 Bankruptcies have a couple of options.

The borrower pays the bankruptcy in full at the close of Escrow. And obtain a payoff letter from the trustee.

The borrower must pay off any liens against the property and any federal debt.

See what my clients are saying!

The court must provide written permission signed by the judge indicating that the borrower does not need to pay off the bankruptcy to proceed with the reverse mortgage. This permission must specify that the mortgage may be an adjustable rate mortgage, if applicable.

Chapter 11 Bankruptcies are most prominently used by businesses and have similar guidelines as a Chapter 13 Bankruptcy.

This is a brief description about what the lending process is and what must take place in order to approve a reverse loan for a borrower who has had credit problems in the past. But do contact me if you have any questions.