running out of money
As the Boomer population ages and the reality begins to loom that at some point they may need someone to provide them with “care giving” but no one wants to talk about this possibility happening to them.
But as we age and I’m going to be 72 myself ( Yikes, when did that happen?) our bodies are going to start to give us trouble as we begin our slide down the slope of aging and at some point, we may need help.
Ideally the Boomer generation has taken better care of themselves then our own parents did and we certainly are much more active than their generation who smoked, didn’t exercise and had high fat diets.
But at the least, they didn’t have as much stress in their lives as we seem to have in our’s and their generation lived a much slower daily pace compared to the hectic lifestyles so many of us have in this period of time.
Hopefully those of you who are reading this post and are of a “certain age”, will manage to dodge falling apart and having to rely on a care giver. But what happens if you need one and you don’t have Long-Term-Care Insurance?
Medicare will not pay for this service in case you were under the impression it would, you have to pay for it.
You will have to rely on your own retirement funds if you happen to have any and pay a professional care giver or rely on family members to take care of you. And that’s a terrible option.
There are two kinds of “costs” in this equation, the actual monthly expense that can run $4000 or more each month while you are helpless or the physiological and turmoil and burden to your family members who will be overwhelmed by the responsibly of taking care of you.
And if you don’t have enough funds to cover this expense, it will be up to your children to pay for it and in many family situations, the adult children will fight among one another and it typically will fall to one of the children to pay for all the expenses and also to attend to your needs. And the one’s who refuse to help in any capacity, will disappear.
As for paying for the care of a professional, licensed and Bonded care giver that expense could be paid by the funds from a reverse loan and it will become a safe and valuable option for money to cover the costs and relieve the adult children from using their own funds to pay for your care.
It’s something to think about, utilize one’s equity to pay for your own needs and not rely on your adult children and keep your dignity and keep your family intact.
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.
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.