Posts Tagged hud
Refinancing With an FHA Mortgage to Avoid Foreclosure
Posted by Victoria Belle-Miller in Finances on 05/17/2010
After the lack of success with the Home Affordable Modification program, the Obama Administration has decided to implement a new plan. With only 170,000 homeowners out of 1.1 million completing the HAMP program, the Administration had to find a new strategy to combat the mounting number of foreclosures in the U.S. With this plan, the goal is to help struggling homeowners pay their mortgages and prevent foreclosures by refinancing with FHA mortgages.
How the New Program Will Work
This program was designed to aid homeowners with underwater mortgages and unemployed homeowners who need assistance making their mortgage payments. Approximately 1 out of 3 homeowners have underwater mortgages, which means they owe more than their homes are worth. Economist Mark Zandi estimates that about 4.5 million homeowners have homes that are in foreclosure or have mortgage payments that are at least 90 days delinquent. Add unemployment to the mix and this issue becomes even more problematic as homeowners struggle to pay their mortgages with less income.
Homeowners do not have to have an FHA mortgage to participate in the program, but they will be required to refinance their current mortgage with an FHA mortgage. A homeowner must owe at least 15% more than the value of his or her home in order to qualify for the program. Homeowners must also be current on their mortgages, which cannot have a balance higher than $729,750, and their credit scores cannot be lower than 500.
Unemployed homeowners can have their mortgage payments lowered to 31% of their monthly incomes (at the most) for three to six months. To do this, they must show proof of their unemployment benefits, and they cannot have more than three missed mortgage payments. Their loans also must have been originated before January 1, 2009.
In order to qualify for this refinance, the homeowner must get his or her principal balance reduced by at least 10%. Incentives (specifics are unknown at this time) will be offered to mortgage lenders to encourage them to reduce borrowers’ principal balances.
What the Program Hopes to Accomplish
This program will be financed with $14 billion of the Troubled Asset Relief Program funds. Not all homeowners in danger of foreclosure will qualify, including homeowners who took on mortgages beyond their financial means. While not everyone can be helped, the program is intended to help about three to four million homeowners avoid foreclosure on their homes. Lowering the percentage of home foreclosures could prevent home prices from decreasing further and be a start toward rebuilding the housing market in this troubled economy.
Some wonder if using FHA-backed mortgages to refinance troubled mortgages is the best answer to prevent foreclosure. The FHA program is already struggling, as made evident by its announcement of the upcoming increases to the down payment and mortgage insurance requirements. Taking on more troubled mortgages could hurt the program more, but only time will tell. For struggling homeowners, this could be the best solution to help them manage their debt. Hopefully, this version of the program will have more success than its predecessor.
Victoria Belle-Miller is the newest member of the FHAMortgageBank.com writing staff. Her background in journalistic writing and ability to evaluate the issues that Americans face in daily life make her a strong addition to the FHA loans team and a valuable source of sound mortgage advice.
Reverse Mortgage Lender Eliminates Fees to Provide Additional Funds
Posted by Victoria Belle-Miller in Finances on 05/17/2010
A reverse mortgage is a great financial solution for homeowners age 62 or over who want to eliminate their mortgage costs, as well as supplement their incomes. This type of loan offers many benefits, such as allowing homeowners to utilize their home equity. Although this loan is very beneficial to many homeowners, some find that it can be expensive. But some lenders are making this type of financing much more affordable by eliminating some of the loan’s fees.
Fewer Fees Increase the Proceeds Available from this Loan
One reverse mortgage lender has decided to offer a greater incentive for borrowers who choose the lump sum as their disbursement option, which has a fixed interest rate. Soon, this lender will completely eliminate the loan’s origination fee, as well as its servicing fee. In the past, other lenders have eliminated one cost or another, but this lender is eliminating both loan costs. By eliminating these costs, eligible homeowners will be able to receive even more proceeds from their loans!
How this Loan Allows Homeowners to Use their Home Equity
In addition to the benefit of having no monthly mortgage payments, homeowners with sufficient home equity can convert their equity into cash. The amount of money a homeowner can receive depends upon his or her age, home value (which is determined by an appraisal) and current interest rates. Generally, older homeowners with higher home values will receive more loan proceeds. The money received from the loan can be used for anything the homeowner desires, such as medical bills, other payments or personal expenses.
Loan Eligibility and Requirements
To be eligible for this type of financing, a homeowner must be at least 62 years old and financing his or her primary residence. This means the homeowner must reside in the home at least six months out of the year. Because there are no monthly mortgage payments, this loan does not have any income or credit requirements, so it is simple to qualify for this type of financing. The homeowner is also required to attend loan counseling to determine if this type of financing is best for his or her needs.
In most cases, a homeowner will owe nothing on the loan for as long as he or she resides in the home unless they fail to meet the loan requirements. These requirements include staying up to date on home repairs, taxes and insurance. If these requirements are not met, the loan will become due and payable.
Even though the absence of the service and origination fees is only available with the lump sum disbursement option, there are other disbursement options a homeowner can choose from. Other disbursement options include a line of credit, monthly payments or a customized combination.
With the new changes being introduced by reverse mortgage lenders, this type of financing will be able to offer more benefits to homeowners and give them even more access to their home equity. This will make life after retirement simpler for homeowners and provide them with greater financial independence.
Victoria Belle-Miller is the newest member of the Senior Reverse Mortgage writing staff. Her background in journalistic writing and ability to evaluate the issues that Americans face in daily life make her a strong addition to the team and a valuable source of sound mortgage advice.
Now is the Time to Finance With a Reverse Mortgage!
Posted by Victoria Belle-Miller in Finances on 05/01/2010
A reverse mortgage is a great financial solution for homeowners who are seeking ways to keep their home, pay all their expenses and still maintain their financial independence. Now is the best time for homeowners to take advantage of this type of financing. Soon, certain changes will take place within the reverse mortgage program that will likely affect future applicants.
Current Administration Requests HECM Subsidy
Home equity conversion mortgages (HECMs), which are the most common type of reverse mortgage, have been successful in helping homeowners find a way out of financial predicaments. The program offers several advantages, but to continue offering these home loans and their benefits, the program needs money. The office of Management and Budget requested a $250 million subsidy for the HECM program in the 2011 budget. If this subsidy is not approved, major changes will go into effect that will likely reduce the effectiveness of the home equity conversion mortgage.
The principal limit factors (or PLFs), which determine the amount of money a homeowner can receive from his or her loan based on age and interest rates, were already reduced at the beginning of this year. David H. Stevens, assistant secretary of Housing for the Federal Housing Administration, said that in order for the program to successfully continue in 2011, whether the subsidy is received or not, the annual mortgage premium will have to increase from 0.5% to 1.25% and the principal limit factors will have to be reduced at least another 1-5%, depending on the homeowner’s age.
What Does This Mean for HECMs?
If the $250 million subsidy is not granted, even more changes will have to take place. Without the necessary money, the principal limit factors would have to be reduced another 21% in 2011, which is unpleasant news for those in the process of obtaining reverse mortgages. Reducing the principal limit means seniors will receive significantly less money from their loan, specifically about 30% less, which equals about $23,000 to $27,000. Stevens fears that, if this change occurs, fewer homeowners will be able to take out these loans because there will not be enough to finance their homes.
Act Now to Reap the Benefits of this Loan
This type of financing is different than other home loans. Unlike most loans, homeowners do not have to pay a monthly mortgage payment. As long as the loan requirements are met, the homeowner will not owe anything on the loan until he or she no longer resides in the home. If there is sufficient equity in the home, the equity can be converted into cash that the homeowner can use for any expense. The amount the homeowner can receive depends on his or her age, home value and interest rates, and the homeowner can choose how his or her money is disbursed.
Stevens discussed how crucial the HECM program is because of the various financial setbacks seniors encounter today, including high medical bills and declines in income and savings. If all of these changes take place, it will eliminate this loan as a financial solution for many homeowners. Homeowners who want to enjoy the current benefits offered by this type of financing should speak with a loan specialist to learn more about their options.
Victoria Belle-Miller is the newest member of the Senior Reverse Mortgage writing staff. Her background in journalistic writing and ability to evaluate the issues that Americans face in daily life make her a strong addition to the team and a valuable source of sound mortgage advice.
The Advantages of Buying a Home With an FHA Loan
Posted by Victoria Belle-Miller in Finances on 05/01/2010
Buying a home is a major undertaking for both first-time home buyers and current home owners who are buying a new home. One of their main goals is finding the right type of financing for their home needs. An FHA loan is a great financing option because it has many advantages and incentives that aim to help those in the process of buying a home save money.
This Loan Saves Homeowners Money
A major expense during the home-buying process is the down payment on the new home. But, compared with other types of home loans, FHA loans tend to require lower down payments, usually around 3.5% of the purchase price. This can be a relief for first-time home buyers who do not have large sums of money upfront, as well as current homeowners looking for ways to cut back on their expenses. Spending less money on a down payment leaves borrowers with more money for other costs associated with a new home.
Because interest rates will affect a homeowner’s monthly mortgage payment, rates are something to consider when choosing a home loan. Interest rates tend to fluctuate based on current market conditions and other factors. But, because the Federal Housing Administration insures this type of financing, lenders are able to offer low interest rates. Homeowners are also able to get fixed interest rates so that their interest rate will not change over time. Low, fixed interest rates will save homeowners money and leave them with more money available for their other expenses.
This Loan has Simple Qualification Guidelines
The FHA aims to make these loans affordable for different types of home buyers. Therefore, they do not have strict credit or income requirements. If an applicant has a troubled credit history, he or she may still qualify for a loan, as long as he or she has had no delinquent rent or mortgage payments in the last twelve months. Applicants with low credit scores can still qualify, but most lenders will require an applicant to have a credit score of at least 620.
This Loan has Few Requirements
The FHA requires that the applicant have an appraisal done on the home to determine the home’s value and to determine that the home is safe and meets other necessary requirements. An inspection is not required, but it is highly recommended to check for any essential repairs that need to be done on the home.
There is a mortgage insurance premium that must be paid. It covers loan costs in the event of a default and is usually about 1.75% of the loan amount. The upfront portion of the insurance can be financed into the loan, which eliminates one out-of-pocket cost. Homeowners will then need to pay a monthly mortgage premium with their mortgage payment.
Consider an FHA Loan for Your Home Purchase
This type of financing is known for having high loan-to-value limits, which means that the amount of the loan can be equal to a higher percentage of the home’s value compared with other types of home loans. Please note that loan limits vary by location. The federal maximum loan limit is $729, 500.
If a potential applicant finds the advantages of an FHA loan appealing, an FHA loan specialist can help them take advantage of this loan to finance his or her new home.
Victoria Belle-Miller is the newest member of the FHAMortgageBank.com writing staff. Her background in journalistic writing and ability to evaluate the issues that Americans face in daily life make her a strong addition to the FHA loans team and a valuable source of sound mortgage advice.
FHA Loans Are a Great Option For First-Time Home Buyers!
Posted by Victoria Belle-Miller in Finances on 04/20/2010
For a first-time home buyer, the process of buying his or her first home can be complicated and expensive, but it doesn’t have to be! FHA loans have flexible requirements and actually save first-time home buyers large sums of money both upfront and in the long run. These loans offer multiple benefits and are not difficult to qualify for!
Benefits of this Type of Financing
While many home loans can require large down payments, this type of loan has a low down payment requirement. The down payment is usually about 3.5% of the purchase price. Applicants who are just starting out may not have a large sum of money to pay up front, so this loan would be very beneficial to them. New homeowners can use the money they save to pay for the many other expenses associated with buying a new home.
These loans are insured by the Federal Housing Administration (FHA), which makes lenders more likely to offer low interest rates. Interest rates fluctuate daily, but these loans often have lower interest rates when compared to other types of home loans. With a lower interest rate, homeowners save money on their monthly mortgage payments and over time. This leaves more money in their pockets every month for all of their other expenses.
Loan Requirements
This type of financing does have certain requirements for borrowers. An appraisal will be done to determine the home’s value and to ensure that the home is hazard-free and structurally sound. At closing, the borrower must pay an upfront mortgage insurance premium to cover the costs of the loan in case of default. This mortgage insurance premium is usually equal to about 1.75% of the total loan amount. Also, the borrower will have to escrow his or her property taxes and homeowner’s insurance into an account to keep payments up to date.
The FHA does not have strict credit and income requirements. The borrower needs to have gone at least twelve months without any delinquent rent payments and should have a credit score of at least 620. In some cases, a borrower with a credit score lower than 620 can still qualify for a loan, but may have to make a higher down payment. Borrowers must also be financing a home that is considered to be their primary residence, which means they will live there at least six months out of the year.
Now is the Time to Take Action!
Current FHA guidelines are scheduled to change this spring. First, the down payment requirement will be higher for borrowers with credit scores lower than 580. Secondly, the required mortgage insurance premium will increase to 2.25%, which will increase home buyers’ upfront costs. Third, the amount of seller concessions permitted will soon be capped at 3%. These changes are meant to improve the viability of the FHA loan program.
First-time home buyers who apply for a loan and have a purchase contract by April 30, 2010 can also take advantage of the first-time homebuyer tax credit, which can provide up to $8000 in tax credits. This is yet another way for them to save money with their FHA loans. This incentive ends soon, so borrowers who want to use the tax credit should act now!
First-time home buyers who want to enjoy the benefits of an FHA loan, and save money by avoiding the upcoming changes, should contact an FHA loan specialist for more information about how to apply.
Victoria Belle-Miller is the newest member of the FHAMortgageBank.com writing staff. Her background in journalistic writing and ability to evaluate the issues that Americans face in daily life make her a strong addition to the FHA loans team and a valuable source of sound mortgage advice.
Reverse Mortgage Loans Help Homeowners Make the Most of Home Equity
Posted by Victoria Belle-Miller in Finances on 04/20/2010
After retirement, many homeowners may be looking for ways to pay for all of their expenses. This is becoming more difficult in our current economy due to certain decreasing government benefits and unexpected pitfalls. Homeowners may be less prepared for retirement than they expected.
The Center for Retirement Research discovered that more than 60% of households are not prepared for retirement when it comes to their finances. Their research found that if retired home owners do not use the available equity in their homes, they are 10% more likely to be at risk for being financially unprepared. A reverse mortgage loan could be the answer home owners are looking for because it can supplement their current incomes and allow them to live the lifestyles they had prior to retirement.
How the Loan Works
Reverse mortgage loans are designed to give home owners financial security and independence after retirement. This type of financing is unique because home owners do not have to make any monthly mortgage payments. This is one less payment home owners are responsible for, and it allows them to put their money toward other required expenses or pleasure. As long as the homeowner lives in the home and meets the loan requirements, he or she will not have to make any payments on the loan.
If a homeowner has sufficient equity in his or her home, which is determined by an appraisal, that equity can be converted into cash. There are no restrictions on how the money is used, but home owners often use the money to supplement their incomes. The amount of money a home owner can receive depends on his or her age, the value of the home, and current interest rates. The home owner can choose to receive the money in a lump sum, a line of credit, monthly payment, or a customized option that combines some of the options listed above.
In most cases with this type of loan, the homeowner will not owe more than the value of the home once he or she no longer occupies the residence. The loan will be repaid using the proceeds from the sale of the home. But, on the rare occasion when the loan balance exceeds the value of the home and the home owner or home owner’s heirs wish to retain ownership of the home, they will have to pay off the full balance of the loan.
Eligibility and Requirements
To be eligible for this type of financing, the homeowner must be at least 62 years old and must be financing his or her primary residence. In order to meet the requirements of the loan, a homeowner must stay up to date on homeowner’s insurance, property taxes, and home repairs. If any of these is not kept current, the homeowner will be required to pay back the loan in full.
All home owners wishing to finance their homes with this loan will be required to attend reverse mortgage loan counseling before they can apply. The purpose of this counseling is to properly educate borrowers about this type of loan to determine if it is the best financing option for their situation. The counselor should inform the borrowers about all the costs associated with the loan and should be able to answer any questions borrowers have.
Consider a Reverse Mortgage Loan when Financing your Home
This type of financing is not right for everyone, so it is important to understand the loan requirements and outcome. This loan will reduce the amount of equity in the home and will cause the homeowner to accumulate debt over time. But for many homeowners, the loan benefits far outweigh the cons, making these loans the best solution for their financial needs.
Retirement is a time to be enjoyed, and no one wants to be financially unprepared. Homeowners can use reverse mortgage loans to supplement their incomes and to live the lives they desire post-retirement.
Victoria Belle-Miller is the newest member of the Senior Reverse Mortgage writing staff. Her background in journalistic writing and ability to evaluate the issues that Americans face in daily life make her a strong addition to the team and a valuable source of sound mortgage advice.
Know What to Expect From Your Reverse Home Mortgage
Posted by Victoria Belle-Miller in Finances on 03/16/2010
Reverse home mortgages were designed to provide older homeowners with financial independence in the years following their retirement, when the need to supplement their incomes may arise. Unfortunately, some people are taking advantage of the homeowners who are eligible for this type of financing, and we are seeing some cases of mortgage fraud occurring. The Federal Grand Jury recently indicted three men on charges of conspiracy and financial institution fraud after they tried to profit from a reverse home mortgage fraud scheme. After sentencing, these men could receive extensive prison sentences, as well as large fines.
The harsh punishments these men could receive show just how seriously the U.S. Department of Housing and Urban Development is taking these crimes. Legislation has been passed in several states to make further strides toward preventing more mortgage fraud in the future. In addition to these efforts, older homeowners can prevent becoming victims of mortgage fraud by knowing exactly what to expect from this loan program.
How This Mortgage Should Work
This loan can be used for a home purchase, to refinance a current mortgage, or just to cash out equity. With this type of financing, a homeowner does not make any payments toward the loan for as long as he or she resides in the home and meets the requirements of the loan. These requirements include staying current on homeowner’s insurance, property taxes and any necessary home repairs. If a homeowner meets these requirements, he or she will not be responsible for any amount exceeding the loan amount once the loan is due.
If a homeowner has enough equity in his or her home, it can be converted into cash. A homeowner can spend the cash on any expenses they choose and the money received is not considered taxable income. The amount of money a homeowner can receive depends upon his or her age, home value and current interest rates. There are different disbursement options a homeowner can choose from, including monthly payments, a line of credit, a lump sum, or a customized combination plan.
Mortgage Eligibility
To qualify for this type of financing, a borrower must be financing their primary residence and be at least 62 years old. This loan does not have minimum credit score or income requirements, so more homeowners are likely to qualify.
All homeowners must attend loan a counseling session before they can take out a reverse home mortgage. The counselor will let the homeowner know what to expect from his or her loan and can answer all of his or her reverse home mortgage questions. Then a homeowner can decide if this loan is the right financing option for him or her.
Do Not Be a Victim
Homeowners should not have to pay for any information. Any reverse mortgage information a homeowner could need is available for free from qualified loan specialists and on the U.S. Department of Housing and Urban Development’s website. A homeowner should thoroughly research the lender he or she chooses to ensure that he or she is reputable. A lender should be able to answer all of the homeowner’s questions, as well as inform him or her of all the costs associated with the loan.
It is important to note that most lenders want to help older homeowners, not hurt them. This type of financing can be a great solution for older homeowners who are looking for ways to supplement their incomes or improve their lifestyles. While the U.S. Department of Housing and Urban Development continues to work hard to protect homeowners from reverse mortgage fraud, homeowners themselves should also utilize the many resources that are available to ensure that they become satisfied borrowers instead of victims.
Victoria Belle-Miller is the newest member of the Senior Reverse Mortgage writing staff. Her background in journalistic writing and ability to evaluate the issues that Americans face in daily life make her a strong addition to the team and a valuable source of sound mortgage advice.
5 Great Reasons to Finance With an FHA Mortgage!
Posted by Victoria Belle-Miller in Finances on 03/16/2010
FHA mortgages are great for people looking to purchase a home and current homeowners who want to refinance their mortgages. With all of the advantages this type of loan offers, borrowers can finance their homes and save money in the process! A low down payment requirement and competitive rates leave borrowers with more money to spend on other expenses.
Easy to Qualify
The Federal Housing Administration (FHA), which insures these loans, does not have strict income or credit score requirements. The FHA only considers the preceding twelve months of a borrower’s credit history to determine if he or she qualifies, though most lenders still require a minimum credit score of 620. So, an applicant with a troubled financial past can qualify for this type of financing if he or she has had no delinquent payments within the last twelve months.
Low Interest Rates
Because the FHA insures this loan, lenders can offer lower interest rates than on other home loans. A homeowner will save money on his or her monthly mortgage payment when he or she has a low interest rate and, over time, can end up saving thousands of dollars in interest!
Low Down Payment Requirement
This type of financing is great for first-time homebuyers who may not have a lot of money or who have yet to build up their credit histories. Compared with other home loans, this loan has a fairly low down payment requirement. Typically, the FHA requires a down payment of 3.5% of the purchase price of the home. By paying less money out of pocket, first time homebuyers can have more money to cover the other expenses associated with buying a new home.
Refinancing Options
With the rate/term refinance mortgage, a homeowner can change the rate and/or terms of his or current mortgage. If current interest rates are lower than when the homeowner took out the original mortgage, he or she may be eligible to receive the lower interest rate. Homeowners can also switch from an adjustable mortgage rate to fixed rate. This change can end up saving the homeowner thousands of dollars over time because the rate will no longer fluctuate. The length of the mortgage can also be changed, if desired.
With the cash-out refinance mortgage, a homeowner can receive cash back by refinancing his or her mortgage. The homeowner would take out a loan for a higher amount than his or her current mortgage and receive whatever is left over after paying off the existing mortgage. There are no restrictions on how the cash is used. The funds can be used to pay for home repairs, medical expenses or other expenses.
There is also a debt-consolidation refinance mortgage. This FHA mortgage allows homeowners to combine some or all of their debt into one monthly payment. This not only makes it easier to pay off the debt, but it also saves the homeowner a significant amount of money in interest and tax savings.
Finance Now Before FHA Guidelines Change
The FHA plans to implement a few guideline changes very soon. Some of these changes include an increase of the mortgage insurance premium, as well as an increase in the down payment amount for borrowers who have credit scores below 580. Interest rates are also subject to change daily, so now is a great time to see what an FHA mortgage can offer you.
Victoria Belle-Miller is the newest member of the FHAMortgageBank.com writing staff. Her background in journalistic writing and ability to evaluate the issues that Americans face in daily life make her a strong addition to the FHA loans team and a valuable source of sound mortgage advice.
FHA Streamline Refinance Saves Money!
Posted by Victoria Belle-Miller in Finances on 03/13/2010
An FHA streamline refinance has multiple benefits for homeowners who want to refinance their current FHA mortgages. One of these benefits includes a lower interest rate. A lower interest rate, along with the other benefits of the loan, will save homeowners money that they can use to pay off other debt or to pay for other expenses.
What is an FHA Streamline Refinance?
The purpose of this type of financing is to lower a homeowner’s interest rate on his or her loan and, in turn, lower his or her monthly mortgage payment. This loan allows homeowners to refinance their existing home loans with a more efficient process. With this type of financing, there is less documentation and less underwriting, which can make the loan process significantly quicker. There is also an option to refinance with this type of loan without having to get an appraisal, as long as certain requirements are met. If no appraisal is done, the new loan amount cannot be more than the original loan that was taken out by the homeowner.
Requirements of this Loan
A homeowner must already have an FHA mortgage that is current in order to qualify for this type of financing. This means there can be no delinquent payments on the mortgage. With this particular type of financing, no additional cash can be taken out. If a homeowner would like to receive cash back when refinancing his or her loan, there is a cash-out refinance option available, but this option is not a streamline loan.
There are closing costs associated with this loan, but a homeowner has options that allow him or her to avoid paying them out of pocket. In some instances, homeowners can choose to obtain a higher rate in exchange for lower closing costs. On the other hand, if there is sufficient equity in the home, a homeowner can decide to have the closing costs included in the new loan amount. An appraisal will determine if there is an adequate amount of home equity for the homeowner to choose this option.
Benefits of this Type of Financing
Refinancing with this loan can lower a homeowner’s rate and monthly payment and save him or her money over time. This type of loan has more efficient processing when compared with other home loans. It can have fewer requirements, and, in some cases, the closing costs can be financed so homeowners will have less money to pay upfront. This saves them more money for their other expenses.
There are not strict eligibility requirements for this type of financing. Homeowners do not need a high credit score or income to qualify for this loan, but most lenders will require that a borrower have a credit score of at least 620. For homeowners who would like more refinancing options besides the streamline refinance, the FHA also has refinance loans that allow a homeowner to consolidate debt, change the terms of his or her loan or receive cash back.
This type of financing is a great option for current homeowners who want a quick way to reduce their current interest rates and lower their monthly payments without having to meet all of the standard requirements for a home refinance loan.
Victoria Belle-Miller is the newest member of the FHAMortgageBank.com writing staff. Her background in journalistic writing and ability to evaluate the issues that Americans face in daily life make her a strong addition to the FHA loans team and a valuable source of sound mortgage advice.
How Could an FHA Reverse Mortgage Affect Retirement?
Posted by Anne Johnson in Finances on 03/03/2010
A FHA reverse mortgages are available to homeowners who are at least 62 years of age and who own the home in which they live. This financial product can help seniors who do not have sufficient income to meet their monthly needs, but do have equity in their home. The FHA reverse mortgage works by liquidating that equity in order to eliminate monthly mortgage payments, disburse payments to the homeowner, or both. Provided that the homeowners remain current on their obligations, the homeowner is not required to repay any of the loan balance until they no longer occupy the home.
An FHA Reverse Mortgage Can Make Retirement Comfortable
A common misconception about the FHA reverse mortgage is that homeowners must own their homes free and clear in order to utilize this product. The truth is, one of the main uses of this financial product is to eliminate monthly mortgage payments. Without the burden of monthly mortgage payments, homeowners have extra cash available to help maintain or improve their standard of living. While there are no monthly mortgage payments required, as long as at least one homeowner remains using the home as their primary residence, homeowner’s insurance, real estate taxes, and home repairs continue to be the responsibility of the homeowner.
How Can the Funds from an FHA Reverse Mortgage Be Used?
If the homeowner has enough equity, he or she can not only eliminate monthly mortgage payments, but receive additional funds from the FHA reverse mortgage. The amount of the additional funds will vary based upon the home’s value, homeowners’ ages, and how much equity is available.
The funds can be disbursed in many different ways and tailored to the needs of the borrowers. The different disbursement options include a lump sum, a line of credit, monthly advance, or a combination of these options. The funds received from an FHA reverse mortgage can be used however the homeowners wish. Common uses for the money are to supplement monthly incomes, to finance healthcare, and to eliminate other monthly expenses, but there are absolutely no restrictions on the use of these funds.
Could the FHA Reverse Mortgage Affect my Government Benefits?
Depending on the type of assistance a homeowner receives, an FHA reverse mortgage could affect their eligibility to continue receiving it. Though the existence of the FHA reverse mortgage itself does not affect any eligibility requirements, the funds a homeowner receives from this product could.
If a homeowner receives an entitlement-based benefit, this financial product will not affect their eligibility. Federal entitlement programs in the United States include Social Security and Medicare. These programs are both based upon factors such as the recipient’s age and job history and, therefore, will never be affected by an FHA reverse mortgage.
Programs such as Medicaid and Supplemental Security Income are considered need based and could be affected by the proceeds from this financial product. In order to be certain that this product will not affect any federal or state benefits, home owners should speak with their caseworkers about the potential implication of receiving money from an FHA reverse mortgage.
An FHA reverse mortgage can help senior homeowners live more comfortably during their retirement. This product can eliminate monthly mortgage payments, as well as provide additional funds to help supplement a fixed income. While this product is certainly not for everyone, seniors who feel they may benefit from this type of loans should speak with a reputable reverse mortgage specialist about their options.
As a former psychology major, finding solutions to resolve people’s problems has always been a subject of interest to me. I hope that my writing will give people the confidence to make decisions about reverse mortgages. In addition to writing, I love to read, knit, spend time with friends and family, and watch the Missouri Tigers and Green Bay Packers!