Reverse Mortgage – Answers To Top 5 Questions

Reverse mortgage is catching up fast with the senior citizen crowd. However, there are still many unanswered questions hovering over people’s minds. These questions have been answered here… What are the requirements to qualify for reverse mortgage loans ? In America, a senior citizen above 62, who owns a home, is eligible for reverse mortgage. However, certain properties with lower value, such as small mobile homes don’t qualify for this financial facility. How is reverse mortgage different from regular mortgage? In regular mortgage, the borrower’s creditworthiness is given tremendous weight. This is not so in reverse mortgage, as the borrower is not liable to repay the loan. Even if you are declared bankrupt, you can apply for this financial facility, although the process of application might be slower than that in normal cases. The reverse mortgage lender focuses on the amount of home equity you possess, because this equity will serve as the source of funds for loan payment. Therefore, the lender leaves no stone unturned to find out the exact value of your home. Besides, this type of mortgage does not have provision for second or third mortgages, unlike the regular one. The reason is that, the loan payment is drawn from home equity amount, which, after paying the loan, may not be left much to opt for second mortgage.

More Questions For Reverse Mortgage Loans

How is the amount of reverse mortgage loans determined? Several factors work in determining the amount of such loans. They include things such as the appraisal value of your home by Fannie Mae (FNMA) or Federal Home Administration (FHA), location of your home, and the age of borrower. Fannie Mae, under its mortgage program, has put a limit of $200,000 for these loans. However, a commercial reverse mortgage lender may offer proprietary loan products that provide higher limits. How to avoid falling in the trap of frauds? With an increasing number of lenders willing to offer various types of loans at attractive reverse mortgage rates, you need to tread cautiously in this path of borrowing money. The federal law has made it mandatory to get financial counseling from an approved source that has been given the green signal from HUD – Department of Housing and Urban Development. It’s unwise to overlook this counseling. It’s of much significance. You can obtain it either free or at minimal cost. The best place to get this counseling is AARP – American Association of Retired Persons.

Last Question Regarding Reverse Mortgages

Are there any pitfalls of reverse mortgage? There’s nothing in this world that comes with benefits alone. A few pitfalls always follow. In case of reverse mortgage, its upfront cost is the pitfall. The typical loan origination fee is 2 percent and there is another 2 percent for FHA mortgage. The normal closing costs, such as title search, surveys, appraisals, and others are also there. So, if you take a mortgage of $200,000, your up front cost would amount to a whopping $8,000, along with the other regular closing costs. Although, the AARP is putting in efforts to introduce a program in collaboration with the government to minimize upfront costs, there is still time for such a thing to happen. Therefore, if you intend to reside in your house for not more than about five years, it’s prudent to drop the idea of taking reverse mortgage. But, for those who wish to dwell in their home until their last breath, there is nothing better than reverse mortgage loans. However, do not forget to do your homework before plunging into this mortgaging business.