reverse loans Los Angeles County

Reverse Mortgage Application

What are the steps to apply for a reverse loan?  Is it the same as applying for a traditional mortgage or is it different?

It is just like applying for a regular loan, except the borrower won’t have to make any mortgage payments but they will still be responsible for maintaining their home, paying the property taxes, and Homeowners insurance.

The loan application is standard, but there are many lender, state, and federal disclosures to sign in the  application package.   It does require quite a few signatures and a complete copy of it is left with the applicants to save and review.

Along with the signed application, copies of bank statements, Social Security card, Drivers License, Declaration page for Homeowners insurance, Trust  ( if there is one), and any mortgage statements for the property, plus a signed HUD Counseling Certificate.

The file and documents are sent to a loan processor, Escrow is opened and a Title Policy is ordered, along with an order for an appraisal to be scheduled.

When the loan processor has all the necessary items to make the file complete, it is sent to a Lender for Underwriting.

They review it and make sure it is complete prior to giving it an approval.   Sometimes they may request a few additional items,  but nothing that is unusual.

The next step is to order the loan documents and coordinate with Escrow, assign a Notary to meet with the clients and have them sign the documents.

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The documents are returned to the Closing Department of the Lender, they review them for all signatures, communicate with Escrow to finalize closing figures and after the 3-day Right of Recession, the loan funds and closes.

The entire process takes approximately 45 days as long as the borrower has provided all of the necessary documents that are needed for the file.

Appraisals can cause a delay, or issues with the Title of the property, and sometimes the lack of cooperation from the borrower will cause the loan to take longer to complete.

Applying for a reverse loan is generally not difficult and can be completed in a reasonable amount of time.

 

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Higher Reverse Loan Amounts

Effective this month and year, the HUD Lending Limits for FHA Reverse loans were increased from $765,600 to $822,375.00

This is quite a large increase over previous years and could possibly make a difference for senior borrowers who will now have more access to their home’s equity, than they would have had last year in 2020.

The Lending Limit caps a home’s value at this figure, even if a property is worth more, the reverse loan amount will always be calculated on the Lending Limit or the appraised value of the home, whichever is less and the age(s) of the youngest borrower.

For some seniors, this increase can make it now possible to do the loan, because the higher value will possibly provide them a larger loan amount that can pay off an existing mortgage with a high balance, whereas previously, the loan may have been not been adequate enough for refinancing an existing mortgage.

Mortgage interest rates are at the lowest they have ever previously been, and that includes the interest rates on reverse loans, too.  And in addition to very low rates, home values have increased substantially, creating more equity for many homeowners.

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Whether it is Fixed loan or a Line of Credit, FHA HECM, or one of the Jumbo reverse loans, now is the best time to apply for one,take advantage of  low interest rates, and also the increased value of your home.

Use a reverse loan to  increase your cash flow and create a safety net for the future, and have funds for unplanned expenses, and gain peace of mind.

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Unplanned Life Events

We can never know what might or could happen in our lives from day to day.   Recently it has been the pandemic of Covid-19 that has killed almost 200,000 Americans as I am writing this and the extreme fall-out from it which has created a massive amount of people who have lost their jobs and businesses.

Then there are the weather events.   Massive killer fires in the western half of our country and the East and the South have to face more hurricanes and flooding.  No one feels safe anymore and if you are a senior, even less so.

And that is why more seniors are seriously considering using a reverse loan so that they have money that is “banked” and available to them no matter what happens.

One example would be they have an insurance claim for damage to their home and the insurance company is fighting with them over it, at least they have money in the meanwhile to take care of their personal needs until they reach a settlement.

Add in isolation for seniors due to Covid-19, and anxiety about money is not a positive situation, but at the least having enough money reduces some of it, and about how to pay for food, care giving and other monthly expenses.

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If a senior has been relying on income from being employed to pay their mortgage payment, but now they are unemployed, they could refinance into a reverse loan that doesn’t have a monthly payment.

But reverse loans have a reputation for being expensive, but are they?   They have the same costs as a traditional loan,  but many people have heard they are expensive, but in truth, they are not.

Now more than any time in the past, is the time to learn about reverse loans, how much money you could receive, and if doing one is your best option to eliminate your worries and fears about the future.

Contact me for a chat about your situation and find out if a reverse loan be of value to you.

 

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Buying a Home

Mortgage interest rates are so low, the lowest they have ever been having caused Americans to rush into the very competitive Real Estate market and buy homes to take advantage of the interest rates as quickly as they can locate a property to purchase.

If you are a senior, you may be considering selling a large home that has become a burden in maintenance for you or no longer suits your lifestyle, and have started to look at Listings of homes in your area before you decide if you want to stay where you are or sell your home and move.

If you decide that you are ready to make a change and maybe you are considering moving into a 55+ community,  a new Tract development, or a previously owned home, you can apply for a reverse loan rather than traditional financing.

A reverse loan is easier to qualify for, you will not have to be concerned about being approved using Debt to Income ratios or FICO scores.   The Title will be in your name, you will be its owner, not the Lender.

And the best news?   You will not have any mortgage payments.

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Becoming approved for a reverse loan is much less difficult.   Generally, when a reverse loan is used to purchase a new home, the buyer will put down approximately 50% of the sales price.   Obviously the funds would come from the sale of their current home.

Find out early in your “search” how much you could be pre-approved for and receive a letter from a reverse loan lender ( me), that will help you to leverage your offer and “seal the deal”.

Contact me and we can chat about it and I will provide you with information to help you work with a Realtor and answer your questions on how to get started.

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Reverse Mortgage Foreclosure

So what happens when the last borrower on the reverse loan passes away?

The terms of the loan state the borrower must occupy the property to avoid foreclosure, but if they have died, the loan is now technically considered to be in foreclosure.

However, as long as the Estate notifies Loan Servicing about the situation, they will be given ample time to repay the loan balance.

The Lender does not want to property, in spite of the myth in the general public’s opinion.

Assuming the borrower has family and they are considered to be the “estate”, they have two choices to repay the loan and the Lender will give them up to a year to satisfy repaying it.

List and sell the home.   And that is what most family members do.   They don’t want the home.   They receive any remaining equity, plus a mortgage interest tax deduction for the interest that accrued on the loan ( There are no mortgage payments).

One or all of the family members apply for a traditional mortgage,( have the Title put into their names) and keep the property.   They would still receive a mortgage interest tax deduction in the year they repay the loan back to the Lender.

I do have an excellent booklet for family members that was published by the National Reverse Mortgage Lenders Association that explains the process when it is time to satisfy the loan.

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If anyone reading this post wishes for a copy of it, please contact me and I will send it to you.

Reverse loans have improved thousands of lives of seniors everywhere.   They help with cash flow, paying for caregiving expenses, and eliminate living in fear of running out of money and they have brought comfort and peace of mind for seniors and their families.

They are not defined at predatory lending.  They are well regulated and the protection of the senior is of utmost importance in our industry, and countless seniors and their families are relieved of the financial burden and worry about how to age in place.

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