Reverse Mortgage Qualifications And Requirements
This BLOG On Reverse Mortgage Qualifications And Requirements Was UPDATED On October 18th, 2018
Homeowners who are 62 years of age and older and who have equity in their homes can qualify for reverse mortgages.
- Reverse Mortgage Qualifications is not for everyone and not everyone over the age of 62 years of age will qualify
- However, to those that do qualify, it is an excellent mortgage loan program
- Reverse Mortgages will relieve financial stress where the homeowner can still keep their home until they either decide to sell or until they pass
- Reverse mortgages are mortgage loans where the mortgage lender advances money all at once
- Or in monthly installments and you do not have to pay any monthly mortgage payments until you sell your home or until the borrower dies
- The best way to explain reverse mortgages is through a case scenario
Case Scenario For Reverse Mortgage Qualifications And Requirements
Say John Smith is 62 years old and has owned his home for the past 20 years and has been laid off over a year ago and is behind on all of his monthly payments.
- He is even behind on his mortgage payments and is barely getting by through working odd and end jobs
- His home is worth $200,000 and still owes $50,000 to Chase Bank
- He tried to refinance his home but every lender denied him because he has no income, poor credit, recent late payments, and is in the initial stages of foreclosure
Steps To Reverse Mortgage Qualifications
The above case will be a perfect case where reverse mortgage qualifications that will suit John Smith.
- John Smith will qualify for a reverse mortgage where the reverse mortgage lender will order an appraisal to verify that the home is worth $200,000
- Whatever the appraisal comes in, the reverse mortgage lender will advance John Smith a certain loan to value dollar amount depending on the age bracket
- The younger homeowner is, the lower the loan to value the borrower will get
Loan To Value On Reverse Mortgages
For example, 62 years old is still fairly young so the maximum loan to value ( LTV ) for this age group might be 60% loan to value.
- At 65 years of age, the loan to value might be 65%
- At 70 years of age, the loan to value might be 70%
- At 75 years of age, the loan to value might be 75%
- At 80 years of age, the loan to value might be 80% loan to value
- The older you are, the more money the reverse mortgage lender will advance you
- So on this example, the reverse mortgage lender will advance John Smith $120,000, where the first mortgage of $50,000 will be paid off and the net amount John Smith will receive will be $70,000
Homeowners Insurance And Property Taxes
John Smith is still responsible to pay his homeowners insurance and property taxes but does not have to pay any more mortgage payments until he either sells his home or until he dies.
- His mortgage balance of $120,000 will increase every month because his monthly mortgage payment he does not have to pay gets added on to the original mortgage balance
- Bottom line is that his equity in his home will be decreasing every month unless his home appreciates in value
Reverse Mortgages: Equity And Not Credit Nor Income Is Key
Mortgage lenders that specialize in reverse mortgages are mainly concerned with the equity homeowners have in their home.
- Lenders are not concerned with credit, income, assets, nor liabilities
- Reverse Mortgage borrowers can have bad credit, no income, recent late payments and still qualify for reverse mortgages
- As long as borrowers is 62 years old or older and have equity in their home, they should meet Reverse Mortgage Qualifications
- Their current home can be under foreclosure and as long as the homeowner is 62 years old and have equity, they can qualify for reverse mortgages
Reverse Mortgages Can Be Paid Off Anytime
There are no pre-payment penalty with reverse mortgages.
- In the event if you decide to sell your home, you can pay off the reverse mortgages with the proceeds of the sale
- If you live 50 more years and the balance of your reverse mortgage loan is much higher than the value of your home, you still do not have to pay the balance of the reverse mortgage
- A deal is a deal
As mentioned earlier, homeowners still need to pay all other housing expenses such as the following:
- Property taxes
- Homeowners insurance
Homeowners need to be an owner occupant and cannot rent home and live elsewhere. Otherwise, they will be a violation of Reverse Mortgage terms.
Again, reverse mortgages is not for everyone and the key is that borrowers need equity in home to qualify. For those homeowners with very little or no equity, reverse mortgages will be a difficult option.
Mortgage Rates And Terms On Reverse Mortgages
For those folks interested in reverse mortgages, reverse mortgages have higher rates and higher closing costs If interested in selling their home within the next year or two, they need to weigh in the fees and costs involved in getting a reverse mortgage. Homeowner interested in learning more about reverse mortgages, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at email@example.com.