Qualifying For Reverse Mortgage
Qualifying For Reverse Mortgage:
If you have equity in your home and are at least 62 years old, you can qualify for a Reverse Mortgage. Qualifying for reverse mortgage requires that the homeowner be at least 62 years old. Another requirement for qualifying for reverse mortgage is that the homeowner needs to have equity in their home. The biggest single expense homeowners have is their monthly mortgage payments. Close to half of a homeowners income can go to their monthly principal, interest, taxes, and insurance payments. The monthly PITI , principal, interest, taxes, insurance, can be extremely draining a financial stress for seniors who have retired and lost their full time income and are just counting on their social security income and/or pension income. Seniors who have retired and are just collecting social security income will have a hard time refinancing their home loans for a cash out refinance due to them not having a full time job and just relying on social security income to rely on qualifying for a mortgage. Seniors can have homes that are free and clear and tons of equity but with no income, it is next to impossible to get traditional cash out refinance mortgage loans. With a reverse mortgage, seniors can now get a cash out refinance mortgage with no credit score requirements and no income verification or job required. Reverse mortgages are available for senior homeowners who are at least 62 years old and have equity in their homes.
Reverse Mortgage And Qualifying For Reverse Mortgage
A reverse mortgage is when a mortgage lender will use the equity a senior homeowner has built up over the years and allow the homeowner to borrow against the equity and the homeowner will not have to make any more monthly payments on their home until the homeowner passes. Reverse mortgages are only for owner occupied residences so a senior cannot qualify for a reverse mortgage on their second homes or investment homes.
Who Benefits From Reverse Mortgage
After the 2008 real estate and credit meltdown, many hard working Americans, especially senior, have literally seen their retirement accounts wiped out. Many folks who have retired had to go back on the work force and seek employment. Besides losing part, most, or all of their retirement income, food prices and other goods and services have sky rocketed so living expenses have drastically gone up. Another proven factor is that Americans are now living longer than ever thanks to modern medicine and technological break throughs. Retirement accounts for many are not taking them far and social security income is fixed and many cannot live on just social security income. Workers who retired making $80,000 a year have to now survive with a fraction of that with social security income and not everyone gets pension income. There are many seniors who have equity in their homes who are facing foreclosure because they are not able to afford their monthly mortgage payment and due to little income they cannot qualify for a cash out refinance mortgage loan. HUD’s FHA reverse mortgage loan program comes to the rescue for these seniors.
How Does Reverse Mortgage Work?
As mentioned earlier, a reverse mortgage is for seniors who are at least 62 years old and intend on living in their properties. As long as they intend in living in their homes, there will be no principal payment required. For example, if a homeowner is 70 years old and has a free and clear home with no mortgage, they can take a certain percentage of the value of the property as a one time full payment and does not have to make their principal and interest payments as long as the borrower is alive. They will be responsible for property taxes and homeowner insurance. If a reverse mortgage borrower has a $25,000 first mortgage and the home is worth $100,000, the reverse mortgage borrower may be able to cash out $50,000 or more depending how old they are. Out of the $50,000 proceeds from the reverse mortgage, $25,000 is used to pay off the first mortgage and the reverse mortgage loan borrower does not have to pay any principal and interest payment on the $50,000 new reverse mortgage payment. The excess $25,000 after paying the first mortgage of $25,000 goes to the borrower and they can spend it any way they like it. The proceeds from a cash out reverse mortgage is tax free.