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Should Seniors Buying a Home Use A Reverse Mortgage for Purchase?

Posted on September 9, 2014September 9, 2014 by janjordan

Seniors typically want to be homeowners, often purchasing a new home during their retirement years – some for the very first time. The reasons they are looking to purchase varies, ranging from downsizing, eliminating burdensome stairs or extensive grounds upkeep, moving closer to family, or possibly purchasing their dream home in a different climate. Whatever the reason may be, using a reverse mortgage to make the purchase is an option that should not be overlooked.

Prior to congress approving the Reverse Mortgage for Purchase (HECM for Purchase) program, homeowners that wanted to purchase a new home and obtain a reverse mortgage needed to do so through two separate transactions. The downside of this is obvious. First, when taking out a conventional mortgage, potential borrowers are held to the high income and credit standards of traditional mortgage lenders. And second, the borrower is subject to closings costs from both loans. Since the initiation of the Reverse Mortgage for Purchase program, seniors wishing to buy a new home and obtain a reverse mortgage are no longer subject to overwhelming standards. With a Reverse Mortgage for Purchase, income and credit are irrelevant, and all the fees are wrapped into one transaction.

Some seniors are cash rich when buying a home, so the question arises why not wait to take out a reverse mortgage? Why do it when purchasing? When using the Reverse Mortgage for Purchase a downpayment is required – but for cash rich borrowers, this means they have the opportunity to use their cash as a down payment and potentially purchase a home in a higher price range than they were originally planning AND still live mortgage payment free. Or, on the other hand, if they don’t wish to shop in a higher price bracket, they can keep some of their cash since the reverse mortgage will cover a portion of the cost of the home. The other major consideration is variable interest rates in the future, as higher rates will reduce the amount a senior can draw on a reverse mortgage. Waiting can be a risky strategy if reverse mortgage is something being considered for the future.

Senior borrowers, 62 and over, can use a reverse mortgage for purchase to buy single family homes, town homes, and FHA approved condos as long as it has a certificate of occupancy. The home being purchased will need to be the buyer’s primary residence. The required down payment will need to come from a HUD approved source. And the borrower will be the owner of the home – just like with a conventional mortgage. Click here to learn more about the details of Reverse Mortgage for Purchase.

Jan Jordan is a Reverse Mortgage Specialist serving the Fort Collins, Loveland, Longmont, Greeley, and Front Range areas of Colorado as well as Cheyenne and Laramie, Wyoming. Click here to contact Jan and learn if reverse mortgage is right for you.

Will A Reverse Mortgage Affect Social Security, Medicare & Pension?

Posted on August 1, 2014 by janjordan

A very common concern among seniors and adult children when considering a reverse mortgage is how it will affect social security, medicare, and even certain pensions. For many seniors, these benefits are a large part of their income. Fortunately, because the funds from a reverse mortgage are NOT considered taxable income, a borrower’s benefits will not be affected when taking out a reverse mortgage.

On the other hand, borrowers who have Medicaid, TANF, Food Stamps or SSI may see those benefits affected by this additional income. Because these programs are government sponsored programs with strict approval guidelines based on all sources of income, even non-taxable income, there is a possibility the additional cash flow will need reported. Other supplemental and assistance programs would need to be addressed on a case by case basis. Working with a reputable reverse mortgage lender and required third party counseling will ensure all your questions are answered thoroughly and honestly.

Reverse mortgages are available to homeowners 62 and older, regardless of income or credit. The proceeds can be received as a lump sum, as monthly installments, or a reverse line of credit and can be used for any purpose the borrower sees fit. This FHA insured loan allows the borrower(s) to live mortgage payment free.

Can A Reverse Mortgage in Greeley, CO Provide Guaranteed Cash Flow For Life?

Posted on July 14, 2014 by janjordan

Did you know the average retiree in Greeley, Colorado lives off $1,230 per month from Social Security and a small nest egg? Often times that nest egg only lasts for a portion of the retirement years while their retirement may actually last for two to three decades. This is why financial advisers and retirement planners are beginning to incorporate a reverse mortgage into retirement portfolios at the beginning of retirement, rather than using them as an emergency life line once the “nest egg” has been exhausted.

Through the use of a strategic FHA insured reverse mortgage, retired homeowners are able to use the equity in their homes as an available line of credit for life – without being required to make a monthly mortgage or loan payment. That’s right – a reverse mortgage CAN provide Colorado’s seniors with guaranteed cash flow for life – as long as they continue to live in the home and keep their property taxes, homeowners insurance, and HOA fees up to date. The funds can be used for whatever the borrower deems fit – additional income, medical expenses, vacations, home repairs or modifications, gifts, etc.

Reverse mortgages are available to homeowners 62 and over with no income and credit requirements. This FHA insured loan offers funds through a lump sum or monthly installments without a monthly mortgage or loan payment. With many protections in place to ensure borrowers are adequately educated before using this option, such as required third-party counseling, reverse mortgages are gaining in popularity among retirees from all walks of life. A reverse mortgage for purchase option is available for those looking to purchase a new residence.

Jan Jordan is a Reverse Mortgage Specialist serving the Fort Collins, Loveland, Greeley, Longmont, Boulder and other Front Range areas of Colorado as well as Cheyenne and Laramie, Wyoming. Click here to contact Jan and learn if reverse mortgage is right for you.

Why Reverse Mortgage for Purchase is Different

Posted on June 17, 2014June 17, 2014 by janjordan

The Reverse Mortgage for Purchase program is an age-based mortgage insured by the FHA for folks aged 62 and older. Unlike a traditional mortgage, monthly payments are deferred and the loan balance increases over time. Because the loan is backed by the FHA, neither the borrower(s) nor their heirs are personally liable for the debt. There are also no credit or income requirements.

So what does all that really mean?

It’s actually very simple…let’s say you use a reverse mortgage to purchase your dream home and decide to move in 10 years. When you sell your home you will receive 100% of the net proceeds after paying off the loan balance at the time of the sale. This is exactly how a traditional mortgage works.

The primary benefit of using a reverse mortgage for purchase comes into play during your living years in the fact that you are not paying a monthly payment to the mortgage company, thereby increasing your monthly cash flow. The secondary benefit is for your heirs. What if at the time of your passing your loan balance is greater than the value of your home — what happens?

In a traditional mortgage scenario your heirs would be forced to sell the home at a loss and cover the difference. The terms of a HECM program mandates that neither you nor your heirs are personally liable to cover the difference if your home is sold for a loss. Simply put, it’s not your problem and no one is coming after your estate for a settlement.

Click here for more specific details on how the Reverse Mortgage for Purchase program works.

(Information courtesy of Security 1 Lending).

Can Reverse Mortgage Help You Achieve Your Retirement Vision?

Posted on June 10, 2014June 17, 2014 by janjordan

In an era where “retirement” has taken on whole new meaning and commonly lasts for two or three decades, more and more retirees are ready to live the latter part of their life to the fullest. They see this as a time to enjoy life after years of working and raising a family. But in order to achieve these goals retirees need a plan, but first they need a vision.

For those ready to realize their retirement dreams, start by asking some simple questions:

If your retirement could be anything you hoped for, what would it include? Would you buy a vacation home? Move closer to family and grandkids? Take a yearly cruise? Visit Europe? Volunteer with your most passionate charity? By articulating your desires, you can better prioritize your wants and needs, and consider these costs when developing a retirement plan.

Determine other expenditures that may hinder these goals. Healthcare, home modifications and improvements, debt, and other scenarios like this are the most common. These expenses can arise later in retirement, so preparing for them upfront is often an important consideration.

What are the expectations between yourself, your spouse (if you have one), and your family? It’s amazing how often what is assumed and what is reality vary greatly. So many retirees feel they need to hold on to their assets because they want to pass a home or a vast inheritance down to their children, yet their children would much rather see their parents live their two or three decade retirement to the fullest. Make sure the lines of communication are open and no one is afraid to ask tough questions. The answers may be surprising.

No matter what your retirement vision is, reverse mortgage can help you achieve it. For seniors 62 and over, regardless of income or credit, a reverse mortgage can provide funds to achieve goals, frees up those strapped by limited incomes, and even help purchase a new home.

Reverse Mortgage and the ‘Standby’ Strategy

Posted on May 27, 2014May 27, 2014 by janjordan

In a recent Bloomberg article, the author laid out the case for using reverse mortgage as a responsible option for long-term financial planning. Assistant professor of financial planning at Texas Tech University, John Salter, and two of his colleagues put the scenario to the test.

Here is what they found:

Salter and two colleagues set out to determine if there was a place for reverse mortgages in responsible long-term financial plans. They started by looking at the prospect for a 62-year-old relying on a $500,000 investment portfolio to fund retirement. To reach a 90 percent probability that the money will last 30 years, the retiree could take out just under 3.25 percent of the portfolio’s value annually. (The portfolio is 60 percent stocks, 40 percent bonds.)

The outlook brightened after the planners used what they dub a ‘standby reverse mortgage’ strategy, based on a home valued at $250,000. In a falling market, the reverse was tapped, rather than the portfolio. The retiree repays the money when the market recovers. That supports a 5 percent withdrawal rate, with a 90 percent probability of the money lasting 30 years, Salter says.

Reverses can also be used to create monthly income. Gerald Wagner, CEO of Ibis Software, which does reverse mortgage analysis, crunched some scenarios to test that out. He started with a base assumption of $450,000 in home equity and an $800,000 investment portfolio with a 60/40 allocation. In general, adding the reverse to the mix supported a sustainable withdrawal rate between 5 percent and 6 percent.

Also in reverse mortgages’ favor is tax treatment. The money pulled out is tax-free income and doesn’t count when computing taxes on Social Security income. And a reverse line of credit can help delay taking Social Security until age 70, when retirees get the largest payout.

In order to qualify for a reverse mortgage, the individual must own their home, be at least 62 years old, and have some equity in the home. There are no income, credit, or medical requirements. In general, the older the borrower (or the youngest borrower in the case of couples) and the more valuable the home, the more money available. Other factors also come into play, such as: the appraised home value, interest rates, and the amount of equity in the home.

3 Things to Do with a Reverse Mortgage in Colorado

Posted on March 10, 2014June 17, 2014 by janjordan

One of the best parts of a reverse mortgage is the borrower(s) can do anything they’d like with the funds – while also living mortgage payment free. In Colorado, seniors are more active than ever, whether it be traveling, home improvements, or visiting with family and grandchildren often. As several Colorado cities always make the list of the best cities to retire (including Fort Collins & Loveland in this survey and Firestone, Parker & Louisville in this one) there couldn’t be a better time or place to enjoy life.

Here are 3 fulfilling options seniors are using their reverse mortgage funds for:

Take that trip they always dreamed of – After years of working hard, saving for retirement, and raising a family, some reverse mortgage borrowers are using a portion of their funds to take the bucket list vacation they’ve always dreamed of. This option becomes less probable as they age and makes for a fantastic celebration by the more active seniors.

Visit with loved ones – Whether it’s a sister who hasn’t visited in 10 years, or children and grandchildren, or long lost friends, using reverse mortgage funds to visit with loved ones is a very common today. Travel can be expensive and it holds us back far too often from the visits that mean the most to us, especially as we age.

Make home repairs or upgrades – After a life of caring for others, senior homeowners often find parts of their home may have been neglected. When using a reverse mortgage to tap into home equity without a subsequent loan payment borrowers often make those repairs or upgrades they have been longing for. Whether it’s a sunroom addition or a kitchen remodel, or just dutiful repairs, this is never a bad option.

Reverse mortgages are available to homeowners 62 and over with no income and credit requirements. This FHA insured loan offers funds through a lump sum or monthly installments and eliminates monthly mortgage payments. With many protections in place to ensure borrowers are adequately educated before using this option, such as required third-party counseling, reverse mortgages are gaining in popularity among retirees from all walks of life. And a reverse mortgage for purchase option is available for those looking to purchase a new residence.

Jan Jordan is a Reverse Mortgage Specialist serving the Fort Collins, Loveland, Greeley, Longmont, Boulder and other Front Range areas of Colorado. Click here to contact Jan and learn if reverse mortgage is right for you.

How to Alleviate HELOC Payment Shock with Reverse Mortgage

Posted on January 27, 2014June 17, 2014 by janjordan

At the peak of the housing boom thousands of Loveland and Fort Collins homeowners tapped into their biggest asset – their home – and took out a home equity line of credit or a HELOC. Many of these loans are set to amortize after 10 years, meaning these borrowers are about to see some serious payment shock as their loans readjust and their payments now include interest and principal. The Office of Comptroller of the Currency estimates that 60% of all HELOC balances will start amortizing between 2014 and 2017, and resetting to higher payments could cause a jump in delinquencies. In addition, analysts at Moody’s Investor Services are warning banks of impending losses, worrying this situation may prove problematic, just as payment adjustments during the 2008 housing crisis did.

For retirees already living on a fixed income, borrowers may scramble to make these adjustments fit into their budgets. But homeowners 62 and over have another option – reverse mortgage. With a reverse mortgage seniors have the ability to not only alleviate any impending HELOC payment shock but also live mortgage payment free throughout retirement – all with minimal income and credit requirements. Once a homeowner has obtained a reverse mortgage, they are able to receive their funds in a one-time lump sum or as monthly payments made directly to them.

This scenario is also something to consider for homeowners currently considering a HELOC to make home repairs or improvements. Considering the difference between a home equity loan and a reverse mortgage is important when developing a long term plan. Learn more about HELOC vs Reverse Mortgage here.
Jan Jordan is a Reverse Mortgage Specialist serving the Fort Collins, Loveland, Greeley, and Front Range areas of Colorado. Click here to contact Jan and learn if reverse mortgage is right for you.

Changes to Reverse Mortgage

Posted on September 5, 2013September 5, 2013 by janjordan

I was recently informed that upcoming changes to the FHA Insured Reverse Mortgage program will reduce the amount of proceeds our clients will receive from the loan. FHA may increase rates which, in turn, will decrease proceeds.

In addition, lenders have been notified that there will be stronger qualifying guidelines in the form of a financial assessment. This change may result in taking into account FICO scores, assets, tax and insurance escrows and limiting the amount of draws a customer can take from the loan.

The official guidelines should be out any day and will take effect on October 1, 2013. Counseling and application would have to be completed by the end of September to qualify for existing program guidelines. If you are interested in the FHA-Insured Revers Mortgage, now may be the time to take a second look before the new changes are implemented and qualified funds reduced.

Jan Jordan is a Reverse Mortgage Specialist serving the Fort Collins, Loveland, Greeley, and Front Range areas of Colorado as well as Cheyenne and Laramie, Wyoming. Click here to contact Jan and learn if reverse mortgage is right for you.

FAQ’s about Reverse Mortgage for Purchase

Posted on August 29, 2013June 17, 2014 by janjordan

In a recent blog article, I discussed the various options to use reverse mortgage to purchase a home. One of those options is the Reverse Mortgage for Purchase program (aka HECM for Purchase). This is an excellent option to acquire a home in Fort Collins, Loveland or Greeley, Colorado – and offers flexible options for varying situations.

In this article I’m going to answer some frequently asked questions regarding this program.

What is needed to qualify for a Reverse Mortgage for Purchase loan?

you must be age 62 or older (each borrower on title must meet this criteria, although others residing in home do not)
the home you are purchasing must be your new primary residence
credit and income are irrelevant
you must have your “required investment” (down payment) from a HUD allowable source. The funds cannot be borrowed. The required investment can come from the sale of a currently owned asset or money you have had for at least 90 days.

Who owns the home that I am purchasing?

As the borrower and homeowner, you will always retain the title to the home, just like any other type of home loan.

What will my personal ongoing obligations be after purchasing a home?

It’s very similar to if you owned your home free and clear – you will NOT have a monthly mortgage payment. But as the homeowner, you will be responsible for paying property taxes, home owner’s insurance, HOA fees when applicable, and basic upkeep including home maintenance and utility payments.

When will the loan become due and payable?

With a Reverse Mortgage for Purchase the loan does not reach “maturity” until:

the last remaining borrower passes away
the homeowner sells the home
the last remaining borrower leaves the home for 12 consecutive months due to illness
the homeowner defaults on property taxes or insurance

Will I need to sell my my current home residence to qualify?

Simply put, no. As long as the loan on your current residence is not an FHA loan and your required investment comes from a HUD allowable source, you can keep your current residence – although it will need to be your primary residence. Your lender will ensure you are financially stable enough to support the ongoing obligations on all properties you own. If you decide to keep your current residence as an investment, rental, or vacation property – or you are awaiting the sale of home, it is rarely a problem.

What types of properties can I purchase?

Single family homes, town homes, and FHA approved condos are all eligible properties. The home being purchased will need to be the buyer’s primary residence.

Can I use the loan to build a new home?

These loans cannot be used as construction loans. Homes must have a Certificate of Occupancy issued before a loan application can be started

How is the “Required Investment” amount determined?

The “required investment” or down payment is determined by a calculation set by HUD based on:

The lesser of the sale price or appraised value
The age of the youngest of the borrowers
The current expected interest rate

What may disqualify me from a Reverse Mortgage for Purchase loan?

Foreclosures within the past 3 years.
Unresolved bankruptcy
Unpaid Federal obligations – i.e. federal taxes, defaults on prior government backed loans (such as student loans or government backed mortgages)
Income too low to support multiple properties
Unpaid judgments or tax liens

What is the HUD required “Reverse Mortgage Counseling”?

Prior to being approved for a reverse mortgage, HUD’s Federal Housing Administration (FHA) requires each borrow to participate in a counseling session with an approved agency. These not-for-profit agencies are funded by the federal government and work closely with both the FHA and lenders to ensure a smooth process. The goal of this session is not to steer a potential borrower in one direction or another, but to make sure they clearly understand all aspects of a reverse mortgage.