Month: March 2016

What is Required Reverse Mortgage Counseling?

Posted on by janjordan

Reverse Mortgage Counselor

Prior to being approved for a reverse mortgage, HUD’s Federal Housing Administration (FHA) requires each borrow to participate in a counseling session with an approved agency. These not-for-profit agencies are funded by the federal government and work closely with both the FHA and lenders to ensure a smooth process.

 

The goal of this session is not to steer a potential borrower in one direction or another, but to make sure they clearly understand all aspects of a reverse mortgage.

 

Here is what you can expect at your counseling session:

 

The potential borrower will need to schedule an appointment directly with a counseling agency. The lender does not initiate or take part in the session, but can provide you with resources to seek out a counselor. The session will take place in person or over the phone – although the FHA recommends a face-to-face meeting whenever possible.

 

Prior to your appointment, the counseling agency will provide you with a packet of information to allow you to prepare for the session. During the session the counselor will discuss your immediate and long-term financial needs, your reasons for seeking out a reverse mortgage, address any questions or concerns you may have, and clearly educate you on the process as well as the pros and cons of a reverse mortgage. Again, they are not there to “sell” you on the product, but to educate instead.

 

Once you have completed the counseling session, you will be provided with a “Certificate of Completion”. This certificate verifies to your lender that you have completed the counseling session and that you understand the essentials of a reverse mortgage. Your counselor will also follow up with you to ensure you have no further needs, questions, or concerns.

 

Jan Jordan Reverse Mortgage Info for Fort Collins, Loveland, Greeley, and Front Range areas of Colorado.

Beware: Reverse Mortgage Scams

Posted on by janjordan

Reverse Mortgage Scams

You may hear about email scams, telephone scams, door-to-door soliciting scams – but what about reverse mortgage scams? Unfortunately just as we have scams in every segment of society and at every opportunity, reverse mortgages and seniors are not immune to such activity.
In the past decade, reverse mortgages also known as Home Equity Conversion Mortgages (HCEM), have increased more than 1,300 percent! This certainly offers an astounding opportunity for fraud perpetrators.
What do reverse mortgage scams look like?

 

Victims may be offered a free home, an investment opportunity, or foreclosure and refinance assistance. Senior citizens are often unsuspecting targets for scammers, as they are not familiar with the multitude of unscrupulous and dishonest “programs” that exist. Scammers reach their victims often through churches, investment seminars, television, radio, billboard, and mailer advertisements.

 

When considering a reverse mortgage or HECM product, it is very important to research the company. All reverse mortgages are insured by the Federal Housing Authority (FHA). Seek out companies that are a member of the Better Business Bureau and associated with the National Reverse Mortgage Lenders Association.
Tips for Avoiding Reverse Mortgage Scams:

 

  • Do not respond to unsolicited advertisements.
  • Be suspicious of anyone claiming that you can own a home with no down payment.
  • Do not sign anything that you do not fully understand.
  • Do not accept payment from individuals for a home you did not purchase.
  • Seek out your own reverse mortgage counselor.

 

Jan Jordan Reverse Mortgage Info for Fort Collins, Loveland, Greeley, and Front Range areas of Colorado.

 

What Adult Children Need to Know About Reverse Mortgage

Posted on by janjordan

If you are concerned for your aging parents or relatives as their home becomes too much to manage or too difficult to move about, reverse mortgage may be an option.  It is common for adult children to look into the reverse mortgage process for their parents and help them make the right decision.  Here are some common questions and concerns you may have.

 

Questions to ponder:
1. Do I have the financial resources to help my parents with their medical and living expenses?
2. Is there a concern from other siblings as to inheriting the home or the equity?
3. What are my parents’ wishes as to staying home if medical care is needed for an extended time?

 

Common concerns:

  • Will Mom and Dad use up my inheritance?

While tapping into their equity, your parents’ home may be appreciating in value, which could allow for some equity left at the end of the loan. They are also able to live comfortably without having to depend upon family members to support them.

  • Will the bank take their home?

No, the bank will not take their home. Throughout the life of the reverse mortgage, your parents will continue to own their home and retain title.

  • How much money will they owe when the loan has to be repaid?

Your parents will owe the total amount borrowed, accrued mortgage insurance premiums, accumulated interest, servicing fees, and any other costs and fees financed through the loan amount.

  • What happens to the equity if my parents or I decide to repay the loan by selling the house?

There are two options. Either your parents or the heirs can keep the home and pay the balance due on the reverse mortgage, or they can decide to sell the home and use the proceeds to pay off the reverse mortgage. Either way, the remaining equity is retained by the owners or heirs.

  • What happens to my mom and dad’s house if they move into a senior care facility?

A reverse mortgage becomes due and payable when the last borrower moves out of his or her home permanently. For instance, moving into a senior care facility, selling the home, passing away or moving in with the children.

  • What happens if the loan balance becomes greater than the value of the home?

The Home Equity Conversion Mortgage (HECM) is a non-recourse loan, which means that the borrower can never owe more than what the house is worth. As HECM borrowers, your parents pay a mortgage insurance premium to the U.S. Department of Housing and Urban Development (HUD). They, in turn, guarantee that the borrower will never owe more than the value of their home when the loan becomes due and payable.

  • What are the risks my parents would be taking in receiving a reverse mortgage?

A reverse mortgage doesn’t affect regular Social Security or Medicare benefits. To find out if it impacts other federal or state assistance or medical programs, contact your reverse mortgage lender, tax attorney, or counseling agency.

  • Are there restrictions on how my parents spend their money?

Your parents can spend their money any way they want. Borrowers have used reverse mortgages to pay for grandchildren’s educations, vacations, new cars, home improvements or to eliminate debts. The money can be used for anything they desire.

  • Is there any information that provides what all of the fees will be?

The lender is required to provide your parents with the Total Annual Loan Cost, or “TALC” disclosure, which is required by the Federal Reserve Board. The TALC displays the total transaction costs over the projected life of the loan, which will allow your parents to see all costs related to the reverse mortgage

 

Jan Jordan Reverse Mortgage Info for Fort Collins, Loveland, Greeley, and Front Range areas of Colorado.

Should Cash Home Buyers Consider a Reverse Mortgage for Purchase?

Posted on by janjordan

reverse mortgage loveland fort collins greeleyIn this day and age, buying a home with cash is rare.  And not because of the reasons you may think – such as who has that much cash nowadays?  Well, that is part of the reason, but it’s a little more complicated than that.  Those who have a substantial amount of cash are finding there are no homes available in their price range and suddenly they don’t have enough cash to be a true “cash buyer”.  This diminishes their hopes of living mortgage payment free.  For example, if a retired couple sells their home or allots other funds amounting to $170,000 for a new home, they will suddenly be facing a new dilemma – finding a home to meet their needs, that doesn’t need repairs, and is in the community they wish to live.  With home prices dramatically increasing in the Longmont and Boulder areas, this scenario is playing out ever more often.

 

This is where the Reverse Mortgage for Purchase program can provide a solution.  Not only will the program add funds to the buyer’s available cash making up the difference needed to purchase an appropriate home, it will also allow that buyer to live mortgage payment free.  In addition, putting all your cash into one asset can be a scary thought, especially later in life when the future is largely an unknown, and security is a necessity.  When adding a reverse mortgage into the equation, cash home buyers can consider keeping some of the cash or invest it elsewhere.

 

Here’s how it works:

 

For seniors 62 and over, home buyers are able to use a reverse mortgage to purchase a home.  The amount of the down payment required from the buyer will depend on the amount of the home they are purchasing.  But unlike a conventional loan, not only will the lender provide the funds to make up the difference between the home price and the down payment, the buyers will be able to live mortgage payment free for as long as they remain in the home.  This frees up income for other things – such as secure retirement living, medical expenses, in home care, vacations, or anything else they may desire.  A Reverse Mortgage for Purchase can be used to buy single family homes, town homes, and FHA approved condos.  New construction can be purchased, but it must have a Certificate of Occupancy before the loan application can be accepted. The home being purchased will need to be the buyer’s primary residence and the required down payment will need to come from a HUD approved source.  And just like a conventional mortgage, the buyer will always retain the title to the home.

 

Jan Jordan Reverse Mortgage Info for Fort Collins, Loveland, Greeley, and Front Range areas of Colorado.

A Crash Course on Reverse Mortgage for Purchase

Posted on by janjordan

reverse mortgage loveland fort collins greeley longmont westminster coloradoReverse Mortgages, once typically thought to only help struggling seniors, have undergone enormous changes recently and are being used to help even affluent retirees achieve their retirement dreams and home buyers purchase new homes.

 

The Reverse Mortgage for Purchase program is quickly gaining in popularity. This program allows seniors to purchase a home using a reverse mortgage and live mortgage payment free. To qualify for this program, borrower(s) simply need to be age 62 or older, be purchasing a home to become their primary residence, and have their “required investment”. There are no income or credit requirements and just like with any other type of home loan, the borrower will still be the homeowner and will always retain the title. In addition, similar to a homeowner who owns their home free and clear, there will not be a monthly mortgage payment but the borrower will still be required to pay property taxes, homeowner’s insurance, HOA fees, and basic upkeep and utility payments.

 

The borrower can use this loan to purchase single family homes, town homes, and FHA approved condos. Unfortunately, these loans cannot be used to purchase homes under construction and the home must have a “Certificate of Occupancy” issued prior to starting the application process.

 

As mentioned above, the borrower will need to have their “required investment” or down payment. This amount is determined by a calculation set by HUD based on: the lesser of the sale price or appraised value, the age of the youngest of the borrowers, and the current expected interest rate. There are many examples available of these numbers to help real estate professionals and borrowers determine the price bracket they should search based on the required investment they have available.

 

Unlike a traditional mortgage where the loan reaches a “maturity date”, reverse mortgages have a “maturity event”. This is the event which causes the loan to become due and payable. These “events” include: the last remaining borrower passes away, the homeowner sells the home, the last remaining borrower leaves the home for 12 consecutive months, or the homeowner defaults on property taxes or insurance.

 

Prior to being approved for a reverse mortgage, HUD’s Federal Housing Administration (FHA) requires each borrow to participate in a counseling session with an approved agency. These not-for-profit agencies are funded by the federal government and work closely with both the FHA and lenders to ensure a smooth process. The goal of this session is not to steer a potential borrower in one direction or another, but to make sure they clearly understand all aspects of a reverse mortgage.

 

Jan Jordan Reverse Mortgage Info for Fort Collins, Loveland, Greeley, and Front Range areas of Colorado.

A Client’s Review of Reverse Mortgage for Purchase

Posted on by janjordan

reverse mortgage colorado fort collins loveland windsorThis first hand account of how the decision to go with a Reverse Mortgage for Purchase instead of paying cash for a home changed the course of life for these homeowners is really impressive.  I absolutely LOVE hearing stories like this!

 

Reverse Mortgage for Purchase (aka HECM for Purchase) is available to seniors 62 and over.  Borrowers are required to meet the same age guidelines as with a traditional reverse mortgage, but instead of using the equity from an already existing home they own, they contribute a down payment towards the cost of a new home and the reverse mortgage lender makes up the remainder of the cost – leaving the borrower with NO mortgage payment.  The amount of the down payment is calculated a couple different ways and changes based on the age of the homeowner and the value of the home (click here to learn more about down payments).

We bought our house with a reverse mortgage in 2010. We put down $115K, received as inheritance from my husband’s mother, which could have bought us a 2 BR 1 bath 900 sf on a tiny lot with no mortgage. Instead we have 5 acres, 1850 sf 3 BR 2 bath home, a barn for my 2 horses (which boarding would have been costing us $600 a month at least), 12 x 24 greenhouse, two storage buildings, a workshop, and a pool in an equestrian neighborhood that is peaceful and quiet with no barking dogs, roaring cars, or loud trashy neighbors.  The Reverse Mortgage for Purchase gave us the ability to purchase a much nicer home and still live mortgage payment free.

We pay property taxes, insurance, and upkeep. We do not “co-own” the house with the mortgage company as many believe is the case with a reverse mortgage. It is in our names and we can sell it if we decide to do so. The reverse mortgage is treated just like any other mortgage at the time of sale. It’s paid off at closing and the equity goes straight into our pockets. And we do have equity…in fact, since real estate has rebounded, particularly in our equestrian community, we have more equity than when we bought the house even after having the RM for four years.

We have nobody to leave the property to.  My husband’s children disappeared out of our lives years ago and I have no kids. We’ve left everything in the hands of our lawyer to be sold and the funds split between two animal charities. If we had offspring we wanted to leave anything to, they would have time to decide what to do with the house – either refinance it and pay off the mortgage, sell it and take any equity, or another option.

~ Happy with Horses

 

Here are few basics to the reverse mortgage for purchase program:

  • The purchaser must be age 62 or older (each borrower on title must meet this criteria, although others residing in home do not)
  • The home being purchased must be the new primary residence
  • The purchaser must have the “required investment” (down payment) from a HUD allowable source. The funds cannot be borrowed. The required investment can come from the sale of a currently owned asset or money you have had for at least 90 days.
  • Eligible properties include: single family homes, town homes, and FHA approved condos.  A loan can not be applied for on a new construction home until it has a it’s “Certificate of Occupancy”.

Jan Jordan Reverse Mortgage Info for Fort Collins, Loveland, Greeley, and Front Range areas of Colorado.