How Do You Know If You?re Eligible For A Reverse Mortgage?
How do you know if you’re eligible for a reverse mortgage? Well let’s start out first with what a reverse mortgage is. A reverse mortgage is a loan that allows older homeowners to access the equity in their homes. Instead of making monthly mortgage payments to reduce your debt, you eliminate your monthly payments and actually get money! Reverse mortgages are an option for people who want to turn substantial home equity into cash.
Just like a traditional mortgage, a Reverse Mortgage comes with fees, terms and qualifications for eligibility. You have to be age 62 or older, have a single-family home or other approved property and own the property. You also must live in the home as your primary residence, make the reverse mortgage your first mortgage or you can pay off existing loans with proceeds from your reverse mortgage.
You must also continue to qualify after the loan is made. You should check your reverse mortgage agreement for details, yet generally you have to continuously use the home as your primary residence and keep current on the taxes, insurance, maintenance, etc.
After knowing that you are eligible for a Reverse Mortgage, you’ll want to know how much it will cost you. Like all loans, reverse mortgages have costs. Reverse mortgage interest is the interest you pay on the borrowed money and there may be other costs as well. Most costs can be bundled with the loan so you do not pay out of pocket.
You may be wondering how it works? It’s actually simple, reverse mortgages pay you in a variety of ways. You can receive a lump-sum, periodic payments, a line of credit, or some type of combination. Lump Sum is the easiest. You get the loan balance all at once. Do with it what you will, yet there may not be more for you tomorrow. If you sign up for a periodic payment plan, you’ll get regular payments. These payments might last for a number of years (10 years, for example), or until your loan comes due (often as a result of your death or your moving out of the home). If you don’t know exactly how much you’ll spend or how soon you’ll need it, the line of credit option may make sense.
Some reverse mortgage lines of credit are “growing” lines of credit meaning you may have more and more money available to you as time goes on, not bad. Can’t decide? You can use a combination of the programs above. For example, you might take a smaller lump sum up front and keep a line of credit for later. This may be a reasonable approach if you need to pay off existing debt with a portion of your reverse mortgage loan. Sounds great doesn’t it? You maybe thinking what is the catch? What happens when the loan balance exceeds the value of my home? Or how will this affect my heirs? Well, there is no catch, A Reverse Mortgage is the answer to all your dilemmas. Even if the loan balance exceeds the value of your property, you must simply occupy the property, and maintain the payment of taxes and insurance. As long as you abide by the loan agreement, you cannot be forced to sell or vacate your home. No deficiency judgment can result from your reverse mortgage. FHA insurance guarantees against any loss to the lender. And only upon your passing does the loan balance become due and payable. Your heirs may then repay the loan by selling your home, or refinance the reverse mortgage and keep the home. If your home has appreciated in value, you are required to pay back only the outstanding balance. Any money that remains after the mortgage is paid will go to your heirs.
For FREE reverse mortgage counseling, Give us a call. We’re happy to answer any questions that you may have. Or if you’d like to find out how money you qualify for and if you’re eligible, give us a call at (800)-630-0650.
Tim Jacobs
Golden Years Mortgage Solutions
Your Money…When You Need It
www.GoldenYearsMortgageSolutions.com
(800)630-0650
tim@goldenyearsmortgagesolutions.com
Tim Jacobs @ Golden Years Mortgage Solutions www.GoldenYearsMortgageSolutions.com (800)630-0650 tim@goldenyearsmortgagesolutions.com Golden Years Mortgage Solutions is a reverse mortgage approved FHA Lender. We’ve helped thousands of senior homeowners solve their financial problems. Our agents and brokers collectively have over 60 years of experience in Reverse Mortgage Loans and general financial services, including managers who are industry pioneers with more than 12 years of reverse mortgage experience. Our dedication to providing financial solutions for seniors is evidenced by the number of referrals that come from our existing clients.
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Leave a commentIs it Really Possible to Buy Real Estate With No Money Down?
Copyright © 2008 Lex Levinrad
I have heard many questions over the years from students about whether or not it is really possible to buy real estate with no money down. The most frequent questions I get are from mortgage brokers and realtors. Since mortgage brokers are by definition trained to fund a loan based on bank requirements like 20% down payments, then by definition anything else seems to be beyond the scope of their possibilities. It has been my experience that many real estate professionals don’t seem to understand the concept of “no money down deals”.
Firstly, the definition of no money down does not mean “no money down”. It simply means none of YOUR money down. It could be Uncle Bob’s money, the sellers’ money, or a loan from Aunt Sally. It could also be a credit line, a private investor, hard money lender or anyone else for that matter. It is very important to understand this concept.
Now, if you were to purchase a house and put down 20% which you borrowed from your relative, then you would have purchased the house with no money down. You can call it 100% financing or whatever you want to call it. As far as the bank is concerned you put down 20%. However there is a problem with that since as many mortgage brokers will tell you, banks want to know the source of the funds. When they see that the funds are borrowed and that you have no “skin” (your money) in the deal then they will reject the loan.
So, what is an investor with no cash going to do to get around this problem? The solution is to borrow ALL of the money to purchase the house for cash. If you borrow from Uncle Bob all of the cash then you can be a cash buyer. Cash buyers are very rare today and if you are a cash buyer then you can buy bank owned REO properties at a substantial discount to market value.
But Uncle BOB is not going to feel comfortable loaning you money to buy a house unless there is substantial security for him. Since banks loan money at loan to value (LTV) ratios of 70% Uncle Bob might be especially cautious and only agree to loan money at 60% LTV. Is this risky for him? Well it is less risky than conventional mortgages that are funded by banks. Why is it less risky? Well firstly, conventional banks loan based on a mortgage application, a credit score and an appraisal. But Uncle Bob is a little smarter than the average bank. He actually can go out to the property and inspect it himself. After all, if you don’t pay him then he is going to get the property since he has the first mortgage.
So Uncle Bob is going to need to have enough knowledge of real estate to feel comfortable that if you don’t pay him, and he gets your house that he will have a deal. Uncle Bob is going to do his own comps and is not going to rely on an appraiser. Uncle Bob is going to spend days or even weeks investigating the property compared to the 30 minutes that an out of state loan officer looks at a file. If Uncle Bob is convinced that your deal is a good deal, then he is going to loan the money. If you are paying him 10% interest and the bank is only paying him 2% then Uncle Bob will make more money loaning on real estate compared to having his money in the bank. If Uncle Bob has done his homework then he will only fund a deal at 60% LTV or less. What this means, is that if he thinks the house is worth 0,000 he will only loan you ,000 and no more.
Your challenge will be to find a 0,000 house that you can buy for ,000. Being a cash buyer will make your job much easier because 99% of the buyers that are competing with you will be looking to get a mortgage. Currently it is very difficult to get anything other than an FHA or VA loan. Cash buyers are able to buy properties directly from banks for as little as 50 cents on the dollar. This is a once in a lifetime opportunity.
So start looking for “Uncle Bob” or anyone that you know that has money. Then once you have an investor lined up begin looking for wholesale real estate deals.
When you find a deal the mechanics will work like this:
House is worth 0,000
You purchase for ,000
Uncle Bob loans ,000
Money out of pocket
Now that you own the house, you wait 6 to 12 months for something called “seasoning of the title” and then you go to your mortgage broker and you tell them that you want to do a refinance. You want to get a conventional mortgage at 7% to pay off Uncle Bob at 10%. The bank will require an appraisal and if you were correct in your initial assessments the appraisal should come in at 0,000. If the bank agrees to give you an LTV loan for 70% of the 0,000 appraisal, then they will loan you ,000. Assume closing costs are ,000, so after paying Uncle Bob back the ,000 you are left with the following scenario:
House value 0,000
Bank Loan ,000
Equity ,000
Cash left over from refinance ,000
You just purchased a house with no money down. AND you now have ,000 in your pocket and ,000 of equity in the house. This is called distressed real estate investing. Your challenge is not finding Uncle Bob. There are many Uncle Bob’s out there. They are called hard money lenders or private investors. Your challenge is to find a 0,000 house that you can buy for ,000. That is the hard part. To do this you are going to need to find a distressed seller. If you can learn how to do that then you will have no problem finding the money.
Beginner distressed real estate investors think that finding the money and having good credit are obstacles to their beginning to invest in real estate. This is not true. The biggest obstacle is education. Learn and understand how and why you can buy a 0,000 house for ,000. Understand and know what a distressed seller is and why they would sell a house for less than its current value. Then go out and start looking for a deal. When you find one, give me a call. Maybe I will buy it from you. For more information about distressed real estate and the Distressed Real Estate Institute please visit http://www.lexlevinrad.com
Posted in Buying Real Estate | Aunt Sally, Banks, Cash Buyer, Copyright, Down, Estate, Frequent Questions, Hard Money Lender, Money, Money Down, Money Loan, Money To Buy A House, Mortgage Brokers, Possibilities, Possible, Private Investor, Private Money, Real, Real Estate Professionals, Real Money, Really, Realtors, Reo Properties, Scope, Substantial Discount, Uncle Bob | Leave a commentPoor Credit Home Loans – Some Valuable Facts!
www.realcase.com Lenders assign you a credit score any time you apply for credit. This is there way of them determining whether you are a likely candidate to give credit to, or not. The credit score is a 3 digit number, typically in the range of 300 to 850. At the low end 300 means you have very bad credit and would be unlikely to receive a loan, and on the other end of the scale a credit score of 850 would have the lender salivating at the opportunity to loan you a heap of money.
Posted in Home Loans | Bad Credit, Credit, Credit Home Loans, Credit Loans, Credit Score, Digit Number, Facts, Heap, Home, Lenders, Loans, Money, Poor, Poor Credit Home Loans, Salivating, Some, Valuable | 1 CommentMarkets and mortgages
Note: the mortgage lender I spoke with is not necessarily the largest single recipient of federal bailout money, just one of the largest. Also check me out on www.facebook.com and twitter.com
Video Rating: 4 / 5
Posted in Mortgages | Bailout, Markets, Money, Mortgage Lender, Mortgages, Recipient, Www Video | 25 Comments