Dissecting The Differences In Reverse Mortgage Professionals

When you start navigating the waters of reverse mortgages, you will undoubtedly come across MANY different companies and individuals ready and willing to help.  Flashy ads, website calculators, famous spokesmen, and more.  But who are all these people?  And what is the difference between them?  How do you know what is the best fit for YOU?

Here’s some information I think anyone considering a reverse mortgage needs to know about the various professionals who work in the industry:

Banks and Credit Unions – Most local banks and credit unions do not offer reverse mortgage loans, although sometimes the larger ones will.  Unfortunately seeking a loan through them can often mean little or no face-to-face time, and it’s not uncommon for these banks to leave the industry down the road.  At one time Wells Fargo and Bank of America were in the business, but they quit, leaving their borrowers with loans that few employees can understand and little help if reverse mortgage customers need it. 

Brokers – A reverse mortgage broker is a third party individual that is licensed by the state but doesn’t work directly with a lender, instead they essentially shop the marketplace.  When working with a broker, borrowers will pay higher fees because they will have to cover the costs of the broker.  In addition, because all transactions run through a third party, things can easily get slowed down or even stalled completely.

Direct Lender Specialists – This is the category I fall into.  Working directly with a lender that specializes in FHA insured HECM reverse mortgages, such as Retirement Funding Solutions, direct lender specialists are able to offer local, personal, face-to-face time with clients, and eliminate the need for costly third-party fees.  We are able to do all this while ensuring the smoothest, most efficient transaction possible because they are handling the loan and not farming it out to another company.

Reverse mortgages are available to individuals and married couples age 62 and older.  These FHA insured loans allow homeowners to live mortgage and loan payment free until they pass away, permanently leave the home (meaning 12 consecutive months), or they default on financial responsibilities associated with the home, such as property taxes or homeowner’s insurance.  The funds are available via monthly installments, a line of credit, a lump sum, or even to purchase a home

Janice Cohen is a HECM Reverse Mortgage Specialist serving the North Hollywood, Sunland, Tujunga, Burbank, Glendale, La Crescenta, Montrose and many more areas of southern California.  Click here to contact Janice and learn if reverse mortgage is right for you.

3 Things to Do with a Reverse Mortgage in California

One of the best parts of a reverse mortgage is the borrower(s) can do anything they’d like with the funds – while also living mortgage payment free.  In California, seniors are more active than ever, whether it be traveling, home improvements, or visiting with family and grandchildren often.

Here are 3 fulfilling ways seniors are using their reverse mortgage funds:

Take that trip they always dreamed of – After years of working hard, saving for retirement, and raising a family, some reverse mortgage borrowers are using a portion of their funds to take the bucket list vacation they’ve always dreamed of.  This option becomes less probable as they age and makes for a fantastic celebration by the more active seniors.

Visit with loved ones – Whether it’s a sister who hasn’t visited in 10 years, or children and grandchildren, or long lost friends, using reverse mortgage funds to visit with loved ones is a very common today.  Travel can be expensive and it holds us back far too often from the visits that mean the most to us, especially as we age.

Make home repairs or upgrades – After a life of caring for others, senior homeowners often find parts of their home may have been neglected.  When using a reverse mortgage to tap into home equity without a subsequent loan payment borrowers often make those repairs or upgrades they have been longing for.  Whether it’s a sunroom addition or a kitchen remodel, or just dutiful repairs, this is never a bad option.

Reverse mortgages are available to homeowners 62 and over.  This FHA insured loan offers funds through a lump sum, monthly installments, or a line of credit and eliminates monthly mortgage payments.  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.  And a reverse mortgage for purchase option is available for those looking to purchase a new residence.

Why Reverse Mortgage for Purchase is Different

The Reverse Mortgage for Purchase program is an age-based mortgage insured by the FHA for individuals and married couples aged 62 and older. Unlike a traditional mortgage, monthly payments are deferred and the loan balance increases over time. Because the loan is backed by the FHA, neither the borrower(s) nor their heirs are personally liable for the debt.

So what does all that really mean?

It’s actually very simple…let’s say you use a reverse mortgage to purchase your dream home and decide to move in 10 years. When you sell your home you will receive 100% of the net proceeds after paying off the loan balance at the time of the sale. This is exactly how a traditional mortgage works.

The primary benefit of using a reverse mortgage for purchase comes into play during your living years in the fact that you are not paying a monthly payment to the mortgage company, thereby increasing your monthly cash flow.  The secondary benefit is for your heirs. What if at the time of your passing your loan balance is greater than the value of your home — what happens?

In a traditional mortgage scenario your heirs would be forced to sell the home at a loss and cover the difference. The terms of a HECM program mandates that neither you nor your heirs are personally liable to cover the difference if your home is sold for a loss. Simply put, it’s not your problem and no one is coming after your estate for a settlement.

Click here for more specific details on how the Reverse Mortgage for Purchase program works.

Janice Cohen is a HECM Reverse Mortgage Specialist serving the North Hollywood, Sunland, Tujunga, Burbank, Glendale, La Crescenta, Montrose and many more areas of southern California.  Click here to contact Janice and learn if reverse mortgage is right for you.

Everything You Need To Know About The Reverse Mortgage Appraisal

Northridge, Reseda, Encino, Granada Hills, Sylmar, San Fernando, Sun Valley Reverse Mortgage HECM Janice Cohen CaliforniaGetting assessments on just about anything can seem laborious or tedious, who wants to have something close to them looked at with a magnifying glass? But appraisals for reverse mortgage loans are not only very helpful for everyone involved, they’re required by the lender.  Part of what determines the amount of funding available from a reverse mortgage is the appraised value of the home.  Luckily the process is very simple.

First, after talking with a reputable reverse mortgage specialist, you will submit your application. The specialist or lender will be the one to contact an appraiser who will in turn contact you to set up a time for them to look at your home.

The procedure is standard and involves three steps, the inspection, the research, and the report.

Inspection:

The appraiser will walk through your home with you, he or she might take photographs. It will document features that add value to your home. If the appraiser takes a picture of something in need of repair it lets you know that it matters and gives you a chance to fix it.

Research:

Once the walk through is done, the appraiser’s work continues as they research factors that influence the value they place on your home. Home sales in your area are one area of research. Others include multiple listing services, tax assessor’s records and public records come into play. Anything that will help to give the present value will be taken into account.

The Official Report:

This is the synthesis of the appraiser’s home visit and all the research. The report is used with your loan request. If photographs were taken, they will be included as well.

The appraiser gives this report to the lender who will give you a copy and an updated reverse mortgage figures taking into account the new information.

There are simple things you can do before the appraiser gets to your home to help your loan request. 

Reverse mortgage is an individualized, specialized loan for those 62 and older that allows seniors to tap into the equity of their home while living mortgage and loan payment free.  The funds can be accessed via a lump sum, line of credit, monthly installments, or even to purchase a home. If you are planning ahead 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.

Janice Cohen is a HECM Reverse Mortgage Specialist serving the Northridge, Reseda, Encino, Granada Hills, Sylmar, San Fernando, Sun Valley and many more areas of southern California.  Click here to contact Janice and learn if reverse mortgage is right for you.

Reverse Mortgage For Purchase – A Hidden Gem

Northridge, Reseda, Encino, Granada Hills, Sylmar, San Fernando, Sun Valley Reverse Mortgage HECM Janice Cohen CaliforniaNearly everyone is familiar with a Reverse Mortgage and many even know someone who has used one to increase cash flow or help them remain in their existing home.  But what many people don’t realize is that you can also use one to purchase a home.  This little known portion of the reverse mortgage program, called Reverse Mortgage (HECM) for Purchase, is a golden gem to many seniors who are looking to settle down somewhere other than their current home for retirement.  Whether looking to move closer to family, purchase a single level home, or move into a senior community, these homebuyers are able to purchase a home they often wouldn’t be able to afford otherwise while still eliminating mortgage payments – all in a single transaction.

To qualify, the borrower(s) must be 62 years or older, be purchasing an eligible property, have the required down payment, and meet the HECM financial assessment guidelines.  Eligible property types are single family residences, new construction, HUD approved condos and townhomes. Allowable down payment sources include cash from savings or investments, proceeds from the sale of an existing home or asset, gifts. Funds that are borrowed such as a loan or credit cards are not allowed as a funding source.  The amount of the down payment varies depending on the age of the youngest borrowers and the cost of the new home.

Working with an educated real estate agent and reverse mortgage specialist will expedite the process, and in most cases in a Reverse Mortgage for Purchase does not take longer to complete than a typical home purchase with a traditional loan.

Janice Cohen is a HECM Reverse Mortgage Specialist serving the Northridge, Reseda, Encino, Granada Hills, Sylmar, San Fernando, Sun Valley and many more areas of southern California.  Click here to contact Janice and learn if reverse mortgage is right for you.

Three Things You Never Knew About A HECM Reverse Mortgage

Three Things You Never Knew About A HECM Reverse Mortgage

Northridge, Reseda, Encino, Granada Hills, Sylmar, San Fernando, Sun Valley Reverse Mortgage HECM Janice Cohen CaliforniaReverse mortgages are available to senior homeowners 62 and over, even married couples.  The borrower will live mortgage payment free and always retain the title to the home.  There are many myths and misconceptions that surround reverse mortgages – but there are also some not-so-known perks to the loans.  

Here are my top three:

1.) Most Reverse Mortgages are Insured By the FHA

It is normal for older adults to be concerned with the welfare of their children after their passing. This is one of the reasons many seniors balk at the idea of a reverse mortgage – they don’t want to “saddle their children with their debt.”  

Fortunately, there are safeguards in place to address this issue.

Almost all reverse mortgage are FHA insured. This means under current guidelines there is a large equity reserve that will always protect their home from going upside down.  Even if the homeowner lives to be 110, has used all the equity in the home, and the market has crashed – the heir will NEVER owe more than the home is worth.  FHA/HUD have guaranteed that they will cover the bank’s losses should the situation arise.  This leaves the homeowner and their estate protected against any possible losses.  

It’s important to also know that on the flip side, if the home is worth more than it sells for after the owners passing, the heirs will receive any excess equity available.  The bank will never take more than what is needed to pay off the loan. 

2.) Reverse Mortgages Have the Option of a Growth Line of Credit

For many years, there were only two ways to tap into home equity when obtaining a reverse mortgage – a lump sum or monthly installments.  This is has changed and HUD has added two new options – a Reverse Mortgage Line of Credit (HECM-LOC) which works similar to a Home Equity Line of Credit (HELOC), with the exception the borrowers will NOT be required to make repayments, and the other option is a Reverse Mortgage for Purchase, which allows seniors to use a reverse mortgage to make a home purchase. 

The line of credit is just as it sounds, it is a line of credit with funds that are available for the homeowner to take when they need it. But the major benefit to this line of credit is it also has a growth factor attached to it. This means that any money left in the line of credit will grow at a rate that is equal to the interest rate and mortgage insurance rates on the loan. 

Here’s an example:

Imagine your HECM-LOC has an interest rate of 4.5% and a mortgage insurance rate of .5%. The combined rate is 5.0%.  You have $100,000 in this line of credit which you don’t plan on using for 15 years unless you need it. That $100,000 is going to grow by 5% annually until you begin accessing those funds.

After year one this line of credit is up to $105,000. After year five the LOC is up to $127,500. And After 15 years the total funds in the line of credit are up to nearly $208,000. In 15 years, that 5% return has grown his available funds by 108%!

3.) A Reverse Mortgage Can Be Used To Purchase A Home

Although the Reverse Mortgage for Purchase program has been around for some years, it’s still relatively unknown – even in the real estate community. 

Reverse mortgages are an excellent option for retirees looking to buy a home near or far.  These loans require a down payment at the time of purchase, but beyond that there are quite a few differences than using a conventional mortgage.  

Borrowers are often able to purchase outside their expected “cash purchase” price range, because the cash is used as a down payment and the remainder of the purchase amount is covered under the reverse mortgage loan, while the borrower lives mortgage payment free.  The borrower will also always retain the title to the home, just as they would with a conventional mortgage.  These loans are also FHA insured, so everything discussed above still applies in that regard. The borrower can own other properties and still qualify as long as the home being purchased is their primary residence.  

Janice Cohen is a HECM Reverse Mortgage Specialist serving the Northridge, Reseda, Encino, Granada Hills, Sylmar, San Fernando, Sun Valley and many more areas of southern California.  Click here to contact Janice and learn if reverse mortgage is right for you.

Changes in the Reverse Mortgage for Purchase Certificate of Occupancy Rule

Changes in the Reverse Mortgage for Purchase Certificate of Occupancy Rule

Northridge, Reseda, Encino, Granada Hills, Sylmar, San Fernando, Sun Valley Reverse Mortgage HECM Janice Cohen CaliforniaOne 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 has changed.  Here’s the scoop:

In 2017, 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. 

Janice Cohen is a HECM Reverse Mortgage Specialist serving the North Hollywood, Sunland, Tujunga, Burbank, Glendale, La Crescenta, Montrose and many more areas of southern California.  Click here to contact Janice and learn if reverse mortgage is right for you.

 

Is a HECM Reverse Mortgage for Purchase A Good Decision?

Is a HECM Reverse Mortgage for Purchase A Good Decision?

We’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 the Los Angeles area of California 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 new 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 this past October, 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 to support multiple properties
  • 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.

Janice Cohen is a HECM Reverse Mortgage Specialist serving the North Hollywood, Sunland, Tujunga, Burbank, Glendale, La Crescenta, Montrose and many more areas of southern California.  Click here to contact Janice and learn if reverse mortgage is right for you.

Only 3% Of Retirees Use A HECM Reverse Mortgage to Purchase A Home

Northridge, Reseda, Encino, Granada Hills, Sylmar, San Fernando, Sun Valley Reverse Mortgage HECM Janice Cohen CaliforniaWhy is it that only 2-3% of older Americans use the Reverse Mortgage for Purchase option to buy a home?  Recent studies show that even with the option available to them, they still seek traditional funding or opt to pay cash.  Why is that?  Well, surveys have shown there are three main reasons:

1.) No one told them they could use a reverse mortgage as a purchasing tool.  Unfortunately this happens far too often.  Real estate agents and lenders are either not aware of this option or are not educated enough to suggest it.  If you’re a senior considering purchasing a home, be sure to ask about using a reverse mortgage.  If you aren’t given proper information, contact a reverse mortgage expert such as myself.

2.) Real estate agents do not have enough knowledge to adequately educate the potential buyer about this option.  If you as a potential buyer find yourself in this situation, ask who you could talk to to learn more or seek out an expert yourself.

3.) The third reason seniors opt for traditional financing is the down payment required to use a reverse mortgage.  The down payment amount varies based on the price of the home, the age of the borrower, and current interest rates.

In order to apply 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, you must have your “required investment” (down payment) from a HUD allowable source.

Janice Cohen is a HECM Reverse Mortgage Specialist serving the North Hollywood, Sunland, Tujunga, Burbank, Glendale, La Crescenta, Montrose and many more areas of southern California.  Click here to contact Janice and learn if reverse mortgage is right for you.

Reverse Mortgage Tips for Married Couples

Agoura Hills, Oak Park, Calabasas, Chatsworth, Canoga Park, Woodland Hills Reverse Mortgage HECM Janice CohenIt’s not uncommon to hear heartbreaking stories of reverse mortgages that left a spouse in dire straits after the other spouse passed away.  How could this happen?  Is it something that you need to worry about?  If you and your spouse are considering obtaining a reverse mortgage, it’s important to understand the long term effect it could have on either spouse once the other passes away, and feel confident any appropriate protections are in place.

What Married Couples Need to Know 

When applying for a reverse mortgage the amount of money you can receive is calculated according to the age of the youngest borrower.  The older the borrower, the more money is available from the lender.

If both homeowners are over the age of 62, both homeowners can be on a reverse mortgage loan.  If both spouses are on the loan, the loan continues if either passes away and will continue until both borrowers have passed.

Another scenario to consider is if a borrower obtains a reverse mortgage and then remarries.  If this was to happen, it wouldn’t be unheard of for the married couple to live in the home for 20 or more years before the borrower passes.  At this time the new spouse would not be protected under the existing reverse mortgage loan.  If you have reverse mortgage and you remarry, you could consider looking into refinancing the reverse mortgage and adding the new spouse to the loan.

And yet one more thing to note is the possibility one spouse needs to move out of the home into an assisted living facility due to health concerns.  If this happens, as long as the spouse that remains in the home is on the loan, they can continue under their current reverse mortgage.

Bottom line: If you are married and are considering obtaining a reverse mortgage, it is extremely important to work with a trusted and experienced reverse mortgage specialist who can easily answer all of your questions and address any concerns you may have.  Making sure both spouses are protected should be a lender’s top priority.