Youll Be Helping Military Borrowers Reach A Milestone
Financial peace of mind is important to sellers. But for some, so is the opportunity to honor our military members.
One of the most rewarding things about accepting an offer with a VA loan is knowing that you are showing a veteran that you appreciate his or her service, Serviss said. It can seem like a small gesture, but it can have a huge impact on that service member or veteran.
Consider that, as a seller, you can help a vet, active-duty service member, or surviving spouse purchase a home and put down roots.
It might be this persons first entry into homeownership, enabling them to start a family. They may have recently returned from a deployment and look forward to homeownership as a way to ground themselves and start a new chapter. Whatever is driving them to buy a home, you can honor their military service by considering their VA loan offer.
How Much Money Can You Get From A Reverse Mortgage
The amount of money you can get from a reverse mortgage depends upon a number of factors, according to Boies, such as the current market value of your home, your age, current interest rates, the type of reverse mortgage, its associated costs and your financial assessment.
The amount you receive will also be impacted if the home has any other mortgages or liens. If theres a balance from a home equity loan or home equity line of credit , for example, or tax liens or judgments, those will have to be paid with the reverse mortgage proceeds first.
Regardless of the type of reverse mortgage, you shouldnt expect to receive the full value of your home, Boies says. Instead, youll get a percentage of that value.
Va Loans Close At Similar Rates To Conventional And Fha Loans
Want further proof that VA loan offers are worth considering? These loans tend to close as often as FHA and conventional loans.
In fact, according to the most recent ICE Mortgage Technology report, the percentage of VA purchase loan applications that have closed in the previous 90-day cycle was 75.0%, compared to 76.9% for conventional loans and 75.1% for FHA loans.
The inconveniences sellers typically associate with VA loans are not only minor but they are often offset by the above-average closing success rate exhibited by most VA buyers. If nothing else, preapproved VA buyers are more likely to bring a deal to the closing table than their civilian counterparts, explained Than Merrill, founder and CEO of FortuneBuilders.com.
You may be thinking that 75% is not a very high closing rate. But this statistic doesnt mean that your sale has a one in four chance of falling through. These numbers include applicants who dont close because they choose another lender after applying or dont close within 90 days for another reason. The pull-through rate is incredibly high for buyers who apply then get an accepted offer.
The single greatest reason sellers should strongly consider entertaining VA loan offers is their success rate. The lack of a down payment is in no way reflective of the buyers financial standing and shouldnt be viewed as a red flag. In fact, many of todays VA loan borrowers are highly qualified with pristine credit histories.
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What Are The Types Of Reverse Mortgages
There are different types of reverse mortgages, and each one fits a different financial need.
- Home Equity Conversion Mortgage The most popular type of reverse mortgage, these federally-insured mortgages usually have higher upfront costs, but the funds can be used for any purpose. In addition, you can choose how the money is withdrawn, such as fixed monthly payments or a line of credit . Although widely available, HECMs are only offered by Federal Housing Administration -approved lenders, and before closing, all borrowers must receive HUD-approved counseling.
- Proprietary reverse mortgage This is a private loan not backed by the government. You can typically receive a larger loan advance from this type of reverse mortgage, especially if you have a higher-valued home.
- Single-purpose reverse mortgage This mortgage is not as common as the other two, and is usually offered by nonprofit organizations and state and local government agencies. A single-purpose mortgage is generally the least expensive of the three options however, borrowers can only use the loan to cover one specific purpose, such as a handicap accessible remodel, explains Jackie Boies, a senior director of housing and bankruptcy services for Money Management International, a nonprofit debt counselor based in Sugar Land, Texas.
How Do I Find A Reverse Mortgage Lender
You can locate an FHA-approved reverse mortgage lender by using the HUD Lender List Search tool. This tool allows you to search for lenders in your area using various selection criteria. An FHA loan is a mortgage insured by the Federal Housing Administration.
If youre considering a reverse mortgage, shop around. Compare your options and the terms various lenders offer. Learn as much as you can about reverse mortgages before you talk to a counselor or lender.
Be wary of sales pitches. Some companies may offer you goods or services, like home improvement services, and then suggest that a reverse mortgage would be an easy way to pay for them. Lenders who offer reverse mortgages may pressure you to buy other financial products, like an annuity or long-term care insurance.
You dont have to buy any products or services to get a reverse mortgage . In some situations, its illegal to require you to buy other products to get a reverse mortgage.
Bottom line: If you dont understand the cost or features of a reverse mortgage or any other product offered to you or if there is pressure or urgency to complete the transaction walk away and take your business elsewhere. Consider seeking the advice of a family member, friend, or someone else you trust.
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What Is The Downside Of A Chip Reverse Mortgage
Disadvantages: While your home may continue to appreciate in value and offset some of the interest costs and loss of equity, interest will rapidly accumulate on the amount you borrow. … Due to start-up fees and higher rates of interest, reverse mortgages are more costly than conventional lines of credit or mortgages.
Reverse Mortgage Vs Refinance: Which Is Better
Reverse mortgages can be a good idea for seniors who need more retirement income but still want to live in their homes. However, this might not be the best choice for you if you want to pass your home down to your children, or if you plan on vacating the home soon.
If you’re not sure a reverse mortgage is right for you, there are other refinancing options for seniors. For a homeowner in the right situation, one of these types of mortgages could provide a very viable or even better alternative as it accomplishes one of the major goals of a reverse mortgage accessing equity but allows more flexibility for you and your heirs.
Rocket Mortgage offers cash-out refinances. Read our guide to refinancing to see if this option makes sense for you.
Find a match.
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Our 3 Top Reverse Mortgage Lender Picks
We started with the companies listed on this guide and narrowed them down by first eliminating those without any verified reviews on our site. Companies then had to have an overall satisfaction rating of at least 4 stars to stay on the list, which only left four brands in the running. Finally, we required our top picks to have at least a 2:1 ratio of 5-star to 1-star reviews.
Once we made our selections, we analyzed verified review data collected between March 29, 2020, and March 29, 2021, to determine what customers consistently like most about our top-rated lenders.
American Advisors Group
At the time of publishing, American Advisors Group has an overall satisfaction rating of 4.7 stars based on customer experiences over the last year.
A HECM reverse mortgage from American Advisors Group could be good for someone in retirement who needs extra cash flow to supplement their regular income or cover unplanned life expenses. You may have the option to roll upfront costs and fees into the principal, which is due with the rest of the loan.
Available products: American Advisors Group offers a variety of reverse mortgage loan products and services, including standard HECMs, HECMs for Purchase, single-purpose reverse mortgages, proprietary reverse mortgages and refinancing loans.
Finance of America ReverseLiberty Reverse Mortgage
Reverse Mortgage Company Information
Finance of America Reverse provides homeowners aged 62 and older with financial independence for retirement through reverse mortgages. Eligible homeowners can get a free quote for FAR senior reverse mortgage services.
- HECM and HomeSafe: FAR offers conventional HECM loans and proprietary reverse mortgages through the HomeSafe program.
- Reverse for Purchase: With a HECM or HomeSafe for Purchase, your new down payment is typically between 45% and 62% of the purchase price.
- Silvernest: Silvernest is a program that helps seniors generate income through homesharing. The platform matches your personality profile with potential housemates.
- 24/7 support: Finance of America Reverse offers 24/7 customer service by phone and email. Consumers can easily resolve problems or get questions answered.
- Availability: FAR services are available in most states, and the company has offices in San Diego, New York, Indianapolis and Tulsa.
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Va Loan Limits And Va Loan Entitlement
VA mortgage loan limits are tied to the borrower’s entitlement, which refers to the dollar amount for which the U.S. Department of Veterans Affairs will insure a home loan. If the loan is approved, the VA guarantee will protect the lender against loss if the borrower fails to repay it.
If you have full entitlement on your Certificate of Eligibility , you can borrow as much as you can afford without having to provide a down payment.
If you have less than full entitlement, there will be a limit to how much you can borrow without a down payment.
VA mortgage loan limits will also depend on the conforming loan limit for your county, set by The Federal Housing Finance Agency . As of 2021, the conforming loan limits vary from $548,250 to $822,375 for single-family homes.
If you dont have full entitlement and want to purchase a property over the conforming loan limit for your county, you will have to provide a down payment to qualify.
Full VA loan entitlement
There are two levels or tiers of VA loan entitlement. The first one is valued at $36,000, while the other is tied to the loan limits of the borrower’s county.
First-time homebuyers or those who have never defaulted on a VA loan before have full entitlement. That means there are no limits to how much they can borrow without providing a down payment.
Listen Yourself To What These Rmf Customers Have To Say
Reverse Mortgage Funding is a company that provides older Americans with respect, care and trust. Our goal is to help our customers to enjoy their retirement now and in the future with less financial stress and worry.
This material has not been reviewed, approved or issued by HUD, FHA or any government agency. The company is not affiliated with or acting on behalf of or at the direction of HUD/FHA or any other government agency.
Borrowers who elect a fixed rate loan will receive a single disbursement lump sum payment. Other payment options are available only for adjustable rate mortgages.
§Not applicable in all states some states may impose a higher age requirement. Visit www.reversefunding.com/ equity-elite for details.
Equity Elite Reverse Mortgage is Reverse Mortgage Funding LLCs proprietary loan program, and it is not affiliated with the Home Equity Conversion Mortgage loan program, which is insured by FHA. Equity Elite is available to qualified borrowers who also may be eligible for FHAs HECM program or are seeking loan proceeds that are higher than FHAs HECM program limit. Equity Elite currently is available only for eligible properties in select states. Please contact your loan originator to see if it is currently available in your state.
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Accounting For Interest Taxes Insurance And Fees
Its important to note: a reverse mortgage is not free money. Reverse refers to your loan balance. While you remain the owner of your home and receive payments, monthly interest is added to the loan balance, increasing your debt throughout the life of the loan unless you decide to make payments.
Even if you don’t make payments, you won’t be able to defer all payments on your house. You will still be required to pay:
- Closing costs
- Home maintenance
These are important obligations to remember, because you could lose your home to foreclosure if you fall behind on property taxes or insurance or let your home deteriorate.
Reverse Mortgage Payout Options
Reverse mortgage borrowers can select how frequently they receive their loan proceeds. Depending on the type of reverse mortgage you choose, you can get funds in a lump sum, in fixed monthly installments or through a line of credit. The older the borrower is, the more equity they usually can access, which makes reverse mortgages popular among older retirees.
- Lump-sum payments: Lump-sum payments come all at once in a single disbursement. Lump-sum amounts are most commonly used in HECM for Purchase reverse mortgages.
- Fixed monthly payments: Fixed monthly payments are disbursed regularly. If you opt for fixed monthly payments, you can select from term or tenure payments. Term payments are received over a specific amount of time â typically between five and 10 years. Tenure payments are received as long as the home is your primary residence.
- Lines of credit: A line of credit lets the borrower access funds as needed. The line of credit grows over time, but the borrower doesnât necessarily earn interest on it.
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How Does A Reverse Mortgage Work When You Die Faqs
What happens if you inherit a house with a reverse mortgage?
Heirs who inherit homes with reverse mortgage loans must repay the debt when the last borrower has died, either with their own funds, by refinancing to a forward mortgage, or selling the house. If theres not enough equity in the home to cover the debt, the heirs are not responsible for the shortfall if the reverse mortgage loan was FHA-insured, which most are.
What happens when you have a reverse mortgage and the owner dies?
If the owner dies and theyre the last borrower on the loan, the loan becomes due and repayment begins. However, if a significant other survives them and they are listed on the loan as a non-borrowing spouse, they may be eligible to stay in the home and defer repayment of the reverse mortgage loan.
Are heirs responsible for reverse mortgage debt?
Yes, the reverse mortgage needs to be repaid when the last borrower dies. However, heirs have options when it comes to paying off the debt. They can sell the home, keep the home by refinancing to another mortgage or buying it outright, or sign the home over to the lender in a deed-in-lieu of foreclosure. If the loan was FHA-insured, the heirs are not responsible for any shortfall if the loan balance exceeds the home value.
You Live With Someone
If you have friends, relatives, or roommates living with you who are not on the loan paperwork, they could conceivably land on the street after your death. Those boarders may also be forced to vacate the home if you move out for more than a year because reverse mortgages require borrowers to live in the home, which is considered their primary residence.
If a borrower dies, sells their home, or moves out, the loan immediately becomes due. One solution is to list your boarders on the loan paperwork however, no one living with you under the age of 62 may be a borrower on the reverse mortgage.
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Who Should Avoid A Reverse Mortgage
While there are some cases where reverse mortgages can be helpful, there are lots of reasons to avoid them. A reverse mortgage isnt a good option if:
- You cant find a trustworthy lender or a reputable loan program
- You have outside savings or life insurance that you can tap to cover expenses
- You have heirs who want to inherit your property or family members who live with you and who need to stay in the property after the term of a reverse mortgage
How Do Reverse Mortgages Work
Reverse mortgages do not have to be repaid until the borrower sells the residence, moves out, or passes away. However, homeowners still need to make sure that their home is insured and maintained. While reverse mortgages do not require monthly payments, borrowers can choose to make them to reduce interest accumulated over time.
When you decide its time to sell your home, or you no longer use it as your main residence, you must pay back the lender for the cash you obtained from your reverse mortgage as well as interest and other finance charges.
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Can You Lose Your House With A Reverse Mortgage
As with any mortgage, there are conditions for keeping your reverse mortgage in good standing, and if you fail to meet them, you could lose your home. The ways you could violate the terms of a reverse mortgage include:
- The home is no longer your primary residence.As part of the reverse mortgage agreement, the home must be your primary residence. This means that you cannot leave the home for more than 12 consecutive months, explains Michael Micheletti, spokesperson for Unlock Technologies, a company that helps homeowners access their equity. This rule doesnt bar you from leaving your home to travel or to come and go as you please, but if you vacate the property for 12 consecutive months, the reverse mortgage loan becomes eligible to be called due and payable.
- You decided to move or sell your home.If you have to move and put your home up for sale as part of the move, youre still bound by the requirement to live in the house for 12 consecutive months. If selling your home becomes a challenge and you dont find a buyer within that 12-month window, the reverse mortgage can be called due, Micheletti says.
- You dont pay your property taxes or homeowners insurance. Even with a reverse mortgage, youre still responsible for paying property taxes, and failure to do so could violate the terms of your loan. In addition, you must maintain current homeowners insurance.