Category: Quick Facts

What Makes A Home Eligible For A Reverse Mortgage?

reverse mortgage loveland fort collins greeleyReverse Mortgages are a specialized loan available to seniors 62 and over.  This creative resource is used by a wide demographic – from those looking to supplement a fixed income, to the more affluent in need of protection for retirement assets, and even those wanting to purchase a home in retirement.  But there are some requirements when it comes to the actual home…

Which types of homes are included? 

According the HUD’s Federal Housing Administration, the home must be a single family home or a 2-4 unit home with one unit occupied by the borrower. Some condominiums and manufactured homes that are approved by HUD also meet FHA requirements.

In the case of a Reverse Mortgage for Purchase, borrowers can use a reverse mortgage to purchase a single family home or 2-4 unit home with completed construction that has received a certificate of occupancy.

Are there reasons my home may not qualify?

A home with very little equity may not qualify, although homes with existing mortgages may.

In addition, homes must be maintained with general upkeep and be current on property taxes and other expenses relevant to the home.

A second home or vacation home may not qualify.  The borrower must be living (or plan to live) in the home.

Bottom line

The funds from a reverse mortgage can be accessed via a lump sum, line of credit, monthly installments, or to purchase a home. If you have questions let your specialist guide you in the many scenarios that are possible and the two of you can think creatively about your needs and desires.

Jan Jordan is a Reverse Mortgage Specialist serving the Fort Collins, Loveland, Greeley, Longmont, Boulder and other Front Range areas of Colorado.  Click here to contact Jan and learn if reverse mortgage is right for you.

Taxes and Reverse Mortgage: A Quick Guide

reverse mortgage loveland colorado fort collins longmont greeley boulderAs tax looms, it’s common to start receiving some questions about taxes and reverse mortgage. There are many differences between a reverse mortgage and a traditional mortgage – and taxes are a big one.  Here’s a run down of what to expect come tax time if you have a reverse mortgage.

The Tax Liability Issue

Because any funds you receive from a reverse mortgage are essentially an advance on your home equity – equity you already own and have paid for, the IRS does not consider money received from a reverse mortgage as income, they consider it an advance, therefore it is not taxed as income.  This is the case regardless of how you receive the funds – whether monthly installments, a line of credit, or a lump sum, you will never pay income tax on this.

What About Deductions on Interest?

Here’s one situation where there is a stark difference between a traditional mortgage and a reverse mortgage.  With a traditional mortgage interest and fees paid are tax deductible every year they are paid.  This is still the case with a reverse mortgage, except in the scenario of a reverse mortgage the interest is not paid until the loan comes due, therefore it cannot be claimed as a deduction until this point.  The loan comes due if the borrowers sells the home, passes away, or permanently leaves the home.

Property Taxes

With a traditional mortgage, property taxes are often taken care of by an escrow service.  With a reverse mortgage the homeowner is 100% responsible for making sure these property taxes are kept up to date.  If there are financial concerns about the ongoing cost of property taxes, discuss this with your reverse mortgage specialist.  In the financial assessment there are options to help set aside a portion of the funds to cover ongoing expenses such as property taxes and homeowner’s insurance.

Reverse mortgages are available to homeowners 62 and over, including married couples, with many protections in place to ensure borrowers are adequately educated before using this option, such as required third-party counseling.  Reverse mortgages are gaining in popularity among retirees from all walks of life.  A reverse mortgage for purchase option is available for those looking to purchase a new residence.

Jan Jordan is a Reverse Mortgage Specialist serving the Fort Collins, Loveland, Greeley, Longmont, Boulder and other Front Range areas of Colorado, as well as the Cheyenne and Laramie communities of Wyoming.  Contact Jan and learn if reverse mortgage is right for you.

Want To Sell Your Home That Has A Reverse Mortgage? Yes, You Can

reverse mortgage loveland fort collins greeley longmont westminster coloradoTypically when a senior takes out a reverse mortgage loan on a home, they intend to age there.  But on occasion and for various reasons, the homeowners wants to or needs to sell the home before the loan comes due and payable.  So, what now?

Although this is an important factor, it’s not nearly as daunting as it sounds.  Here’s where to start:

Step 1.) Locate your reverse mortgage loan documents and find any pertinent information regarding the sale of the home.  It will vary from lender to lender.  Most (but not all) reverse mortgage loans are FHA insured.  This means even if you owe more on the loan than the home is worth, you will never owe more than the home sells for.  Consult with a real estate or elder law attorney if you have questions or concerns.

Step 2.)  Contact the reverse mortgage lender to get a payoff quote.  This combined with a home appraisal will give you a good idea of what the sale will look like and what amount of funds you could potentially walk away with.

Step 3.)  Find a real estate agent.  When seeking out an agent, be sure to provide your reverse mortgage loan information up front and look for someone who has experience with such a sale.

Step 4.)  Prepare the home for sale.  From here, everything is similar to any home sale.  You want to prep the home, keep it clean for showings, update anything you may need, etc.

Step 5.)  Sell the home, pay off the reverse mortgage loan (consult with a real estate or elder law attorney if you have questions when paying off the loan), then reap the rewards.  Congrats!

Reverse mortgages are available to seniors 62 and over all over Colorado.  

Jan Jordan is a Reverse Mortgage Specialist serving the Fort Collins, Loveland, Greeley, Longmont, Boulder and other Front Range areas of Colorado.  Click here to contact Jan and learn if reverse mortgage is right for you.

Here’s What You’re Still Responsible For When You Have A Reverse Mortgage

reverse mortgage loveland fort collins greeley longmont westminster coloradoReverse Mortgages have helped millions of seniors live more plentiful lives as they age.  Homeowners and their spouses over the age of 62 are eligible for Home Equity Conversion Mortgages (HECM), but although they will NOT have a monthly mortgage payment to pay, they are still responsible for some financial obligations regarding the home.  These include:

Property Taxes:

Just as with a conventional home loan, a reverse mortgage homeowner is always responsible for paying their property taxes.  Your particular county or city may have a program that allows you to defer a portion of your property tax.  Homeowners can contact their county human services office for more information.

Homeowners Insurance:

Just as with any conventional home loan, reverse mortgage holders are required to purchase and maintain homeowners insurance.  This yearly expense is something that should be discussed with your lender and a reverse mortgage counselor to ensure the homeowner understands their options and a plan is put in place to keep insurance current.

Home Maintenance: 

The homeowner or their family will be responsible for continuing to maintain and upkeep the home.  Because a reverse mortgage uses the equity available in the home to make it’s monthly mortgage payments, if major repairs are needed the homeowners will not be eligible for a home equity loan or similar.  It’s important to keep this in mind, especially when homeowners elect to receive their reverse mortgage funds in one lump sum.  Again, discussing this with your lender can help ensure you have planned to have funds available should a major home repair be needed.

Ultimately, understanding and planning for these expenses is key to being prepared in the years to come.  Working with and asking questions of a reputable reverse mortgage lender, as well as a reverse mortgage counselor, can help alleviate any concerns a homeowner may have.

Jan Jordan is a Reverse Mortgage Specialist serving the Fort Collins, Loveland, Greeley, Longmont, Boulder and other Front Range areas of Colorado.  Click here to contact Jan and learn if reverse mortgage is right for you.

Yes, You Can Have New Home Built Using A Reverse Mortgage

reverse mortgage loveland fort collins greeley longmont westminster coloradoOne of the hidden gems within the reverse mortgage program has long been the ability to purchase a home with it; the Reverse Mortgage for Purchase program.  But within that program was a frustrating rule – the requirement that the home being purchased have a Certificate of Occupancy before a loan application could be submitted.  This meant seniors seeking this option were limited to pre-built homes. 

Well, this rule was quietly changed and few are talking about it.  Here’s the scoop:

A few years ago the FHA announced that it will allow mortgagees to take applications for HECM Reverse Mortgage for Purchase loans from potential borrowers without a certificate of occupancy and before the completion of reverse mortgage counseling.  The FHA will not insure the loans until the local officials deem the property to be habitable and issue a certificate of occupancy.  Lenders will be responsible for getting the appropriate paperwork once it is available.

The Reverse Mortgage for Purchase program allows seniors to purchase a home using a reverse mortgage and live mortgage payment free. To qualify for this program, borrower(s) need to be age 62 or older, be purchasing a home to become their primary residence, and have their “required investment”. 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. 

Jan Jordan is a Reverse Mortgage Specialist serving the Fort Collins, Loveland, Greeley, Longmont, Boulder and other Front Range areas of Colorado.  Click here to contact Jan and learn if reverse mortgage is right for you.

 

Colorado’s Reverse Mortgage For Purchase 101

Jan Jordan Blog : Reverse Mortgage Loveland Fort Collins Greeley Longmont ColoradoWe’re all familiar with the two most common options to purchase a home – take out a mortgage loan or pay cash.  But for seniors 62 and over, there’s another option – the Reverse Mortgage for Purchase program (aka HECM for Purchase).

Looking for a home in Fort Collins, Loveland or Longmont, Colorado but finding it’s a bit out of your price range?  Because the borrower is responsible for only the down payment on the home and will have NO mortgage payments, a Reverse Mortgage for Purchase can help with this too.

What is needed to qualify for a Reverse Mortgage for Purchase loan?

  • you must be age 62 or older (each borrower on title must meet this criteria, although others residing in home do not)
  • the home you are purchasing must be your new primary residence
  • must meet the FHA’s reverse mortgage credit and income guidelines
  • you must have your “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 home or asset, a gift or inheritance, or money you have had for at least 90 days.

Who owns the home that I am purchasing?

 As the borrower and homeowner, you will always retain the title to the home, just like any other type of home loan.

What will my personal ongoing obligations be after purchasing a home?

It’s very similar to if you owned your home free and clear – you will NOT have a monthly mortgage payment.  But as the homeowner, you will be responsible for paying property taxes, home owner’s insurance, HOA fees when applicable, and basic upkeep including home maintenance and utility payments.

When will the loan become due and payable?

With a Reverse Mortgage for Purchase the loan does not reach “maturity” until:

  • the last remaining borrower passes away
  • the homeowner sells the home
  • the last remaining borrower leaves the home for 12 consecutive months due to illness
  • the homeowner defaults on property taxes or insurance

Will I need to sell my current home residence to qualify?

Simply put, no. As long as the loan on your current residence is not an FHA loan and your required investment comes from a HUD allowable source, you can keep your current residence – but the new home will need to be your primary residence. Your lender will ensure you are financially stable enough to support the ongoing obligations on all properties you own. If you decide to keep your current residence as an investment, rental, or vacation property – or you are awaiting the sale of home, it is rarely a problem.

What types of properties can I purchase?

Single family homes, town homes, and FHA approved condos are all eligible properties. The home being purchased will need to be the buyer’s primary residence.

Can I use the loan to build a new home?

Previously these loans could not be used as construction loans and homes needed a Certificate of Occupancy before the loan application could be started.  This changed in the past few years and now homes in construction are eligible.  Read here to learn specifically about obtaining a Reverse Mortgage for Purchase on new construction. 

How is the “Required Investment” amount determined?

The “required investment” or down payment 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
  • The current expected interest rate

What may disqualify me from a Reverse Mortgage for Purchase loan?

  • Foreclosures within the past 3 years.
  • Unresolved bankruptcy
  • Unpaid Federal obligations – i.e. federal taxes, defaults on prior government backed loans (such as student loans or government backed mortgages)
  • Income too low
  • Unpaid judgments or tax liens

What is the HUD required “Reverse Mortgage Counseling”?

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 third party, 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 is a Reverse Mortgage Specialist serving the Fort Collins, Loveland, Greeley, Longmont, Boulder and other Front Range areas of Colorado, as well as the Cheyenne and Laramie communities of Wyoming.  Contact Jan and learn if reverse mortgage is right for you.

Find A Reputable Reverse Mortgage Lender In Colorado

reverse mortgage loveland fort collins greeley longmont westminster coloradoFor many seniors, a reverse mortgage is a feasible option to living within a budget, without the constraints and worry of excessive financial distress.  In order to qualify for a reverse mortgage, the individual must own their home, be at least 62 years old, and have some equity in the home.  Funds from a reverse mortgage can be accessed in various ways including a line of credit, monthly installments, a lump sum, and they can even be used to purchase a new home. In general, the older the borrower (or the youngest borrower in the case of married couples) and the more valuable the home, the more money available.  Other factors also come into play, such as: the appraised home value, interest rates, and the amount of equity in the home.  Once a basic understanding of how a reverse mortgage works, the next step is finding a lender.

Where to find a lender?

Reverse mortgages are marketed in every possible way.  Television, radio, mailers, internet, etc.  Although not all of these methods ensure trouble, some of them can be scams.  When seeking a reverse mortgage lender, it’s important to speak with people you trust.  Ask around at your bank or financial institution.  Speak with a financial or retirement adviser.  Talk with neighbors or friends who have utilized a reverse mortgage.  Seek information from the local Chamber of Commerce or Better Business Bureau.   Utilize other resources that may be available in your community.

What to look for in a reverse mortgage lender?

Working with a reputable reverse mortgage lender is critical.  The reverse mortgage industry is riddled with scams and flashy sales.  It can be risky to get involved with a lender who does not offer all the details or who is just looking to make a “quick sell”.   A reputable lender will have strong connections in the community, working closely with a network of professional organizations.

Accreditations and ratings?

Seek out a lender that is a member of the National Reverse Mortgage Lenders Association (NRMLA).  Members of the NRMLA must conform to a strict code of lending ethic.  Look for a lender that is affiliated with the  Better Business Bureau (BBB), where you can also learn of any complaints against the company.

Follow your gut.

When it comes down to it, always follow your gut.  Just because a lender may meet all this criteria doesn’t mean they will be right for you.  If you do not feel comfortable or feel your questions are not being adequately answered, there is nothing wrong with seeking out a different lender.

Jan Jordan is a Reverse Mortgage Specialist serving the Fort Lupton, Erie,  Lafayette, Fort Collins, Loveland, Greeley, Longmont, Boulder and other Front Range areas of Colorado. Click here to contact Jan and learn if reverse mortgage is right for you.

Increased Reverse Mortgage Lending Limits For 2022

reverse mortgage loveland fort collins greeley longmont westminster coloradoThe Federal Housing Administration (FHA) has announced that the lending limit for FHA insured HECM Reverse Mortgages will be increasing for the sixth year in a row.

Beginning on January 1, 2022, the lending limit for FHA government-insured reverse mortgages will be $970,800, marking an increase of nearly $150,000 from the lending limit HUD set for 2021.

History of HECM Reverse Mortgage Lending Limits 

2022 | $970,800
2021 | $822,375
2020 | $765,600
2019 | $726,525
2018 | $679,650
2017 | $636,150
2009-2016 | $625,500

What These New Limits Mean for Borrowers
 
If you’re a prospective reverse mortgage borrower who has a home valued at or around the new 2022 lending limit, the new MCA will allow you to borrow demonstrably more money in a reverse mortgage transaction.

Remember, the amount of money you can borrow is directly influenced by current interest rates, your home value, and your age at the time that the loan is originated; younger borrowers qualify for generally lower proceeds when compared with older borrowers.

That means that these new limits can certainly make a major difference in the ability for borrowers to earn more money in loan proceeds.

Reverse mortgages are available to homeowners 62 and over, including married couples with many protections in place to ensure borrowers are adequately educated before using this option, such as required third-party counseling.  Reverse mortgages are gaining in popularity among retirees from all walks of life.  The funds can be received via line of credit, monthly payments, lump sum, or as a reverse mortgage for purchase for those looking to purchase a new residence.  The funds can be used however the borrower deems fit – additional income, medical expenses, vacations, home repairs or modifications, gifts, etc.

Jan Jordan is a Reverse Mortgage Specialist serving the Fort Collins, Loveland, Greeley, Longmont, Boulder and other Front Range areas of Colorado, as well as the Cheyenne and Laramie communities of Wyoming.  Contact Jan and learn if reverse mortgage is right for you.

4 Tips To Finding The Best Reverse Mortgage Lender in Colorado

Reverse Mortgage Loveland Fort Collins Denver Boulder Longmont Greeley ColoradoFor many seniors, a reverse mortgage is a feasible option to living within a budget, without the constraints and worry of excessive financial distress.  In order to qualify for a reverse mortgage, the individual must own their home, be at least 62 years old, and have some equity in the home.  Funds from a reverse mortgage can be accessed in various ways including a line of credit, monthly installments, a lump sum, and they can even be used to purchase a new home. In general, the older the borrower (or the youngest borrower in the case of married couples) and the more valuable the home, the more money available.  Other factors also come into play, such as: the appraised home value, interest rates, and the amount of equity in the home.  Once a basic understanding of how a reverse mortgage works, the next step is finding a lender.

Where to find a lender?

Reverse mortgages are marketed in every possible way.  Television, radio, mailers, internet, etc.  Although not all of these methods ensure trouble, some of them can be scams.  When seeking a reverse mortgage lender, it’s important to speak with people you trust.  Ask around at your bank or financial institution.  Speak with a financial or retirement adviser.  Talk with neighbors or friends who have utilized a reverse mortgage.  Seek information from the local Chamber of Commerce or Better Business Bureau.   Utilize other resources that may be available in your community.

What to look for in a reverse mortgage lender?

Working with a reputable reverse mortgage lender is critical.  The reverse mortgage industry is riddled with scams and flashy sales.  It can be risky to get involved with a lender who does not offer all the details or who is just looking to make a “quick sell”.   A reputable lender will have strong connections in the community, working closely with a network of professional organizations.

Accreditations and ratings?

Seek out a lender that is a member of the National Reverse Mortgage Lenders Association (NRMLA).  Members of the NRMLA must conform to a strict code of lending ethic.  Look for a lender that is affiliated with the  Better Business Bureau (BBB), where you can also learn of any complaints against the company.

Follow your gut.

When it comes down to it, always follow your gut.  Just because a lender may meet all this criteria doesn’t mean they will be right for you.  If you do not feel comfortable or feel your questions are not being adequately answered, there is nothing wrong with seeking out a different lender.

Jan Jordan is a Reverse Mortgage Specialist serving the Fort Lupton, Erie,  Lafayette, Fort Collins, Loveland, Greeley, Longmont, Boulder and other Front Range areas of Colorado. Click here to contact Jan and learn if reverse mortgage is right for you.

If I Get A Reverse Mortgage, What Happens When I Die?

Reverse Mortgage Colorado Fort Collins LovelandA common question and concern surrounding reverse mortgage is what will happen to the home after the homeowners pass away?  Will the bank take possession?  Will it be allowed as inheritance?  Will it be possible to keep the home in the family?  Will the family of he deceased be held liable?  These are very valid concerns – so I’d like to offer some clear and concise guidance.

When the last homeowner passes, whether we’re talking about you or a loved one, the home will transfer into the estate or a specific person according  to the wishes expressed in the homeowner’s will.  At this time there are three main options:

1.  Pay off the remainder of the loan

Depending on the amount of equity that still exists in the home, the financial situation of the family, and just the overall ability of those involved, this may or may not be a feasible option.  It’s not uncommon for a portion of life insurance to be used in this manner.  Because these loans are FHA insured, if the loan is repaid, it will never be more than the home is worth – even if the housing market is in a deep low spot.

2. Obtain a conventional loan.

Many mortgage brokers are familiar with the reverse mortgage process and the right broker will be able to help those in need identify the best route in obtaining a conventional loan and keeping the home.

3. Sell the home

The final option is to sell the home.  When there is not a desire to keep the home, the heirs can sell the home.  When the home is sold, the loan will be repaid and any remaining equity from the sale will go to the heirs.

If there are no heirs or the heirs are not interested in the home, no one will be held liable.

One last note, as long as the communication lines remain open, the bank will typically allow up to one year to help with the transition.  This one year is allotted in three month increments.

Jan Jordan is a Reverse Mortgage Specialist serving the Fort Collins, Loveland, Greeley, Longmont, Boulder and other Front Range areas of Colorado.  Click here to contact Jan and learn if reverse mortgage is right for you.