Posts tagged with 'Federal Housing Administration'

Types Of Reverse Mortgage Options

  • Posted on December 27, 2010 at 9:17 am

There are many different reverse mortgage options: single purpose reverse mortgages, federally insured reverse mortgages, and proprietary (private sector) reverse mortgages. Every option has its fair share of pros and cons that need to be considered.

Single-Purpose Reverse Mortgages

A single purpose reverse mortgage is the lowest-cost type of reverse mortgages to obtain, but as the name indicates it can only be used for one specified purpose. These type of mortgages are expedited by state or local government agencies. These loans a great for individuals who need cash for a purposes like paying property taxes or fixing up their own residence. Here are descriptions for several different types of single purpose reverse mortgages:

Property tax deferral (PTD) mortgages are reverse mortgages that provide loan advances for paying property taxes.

Deferred payment loans (DPLs) home improvement reverse mortgages provided in a lump sum disbursement method.

Federally Insured Reverse Mortgages

This type of reverse mortgage is only iinsured by the Federal Housing Administration (FHA). These reverse mortgage are perhaps one of the cheaper multi-purpose reverse mortgages currently available. Overall they typically provide the largest total cash benefits of all the reverse mortgage options.These loans are also known as HECM or Home Equity Conversion Mortgages.

Proprietary Reverse Mortgages

A proprietary reverse mortgage is a mortgage product owned by a private company. These type of loans are more costlier then the other reverse mortgage types and you are advised to approach with caution. Those interested in these type loans should get a comparison with a similiar HECM. The benefit of proprietary reverse mortgages are of its ability to offer higher home value within its limitation.

the higher home value limits. So, if you live in a home that is worth a lot more than the average home value in your county, a proprietary loan may give you greater loan advances than a Home Equity Conversion Mortgage (HECM).

Just like any other financial decision, you should get professional help to decide which option is best for your current situation. Reverse mortgage counselors can help you evaluate each of your options and help you make an informed decision.

Reverse Mortgage Lenders

  • Posted on September 27, 2010 at 9:17 am

You’ve made the decision that you need some extra assistance in meeting your monthly financial obligations. One of the best options for those over sixty-two years of age who own their own home is a reverse mortgage. Instead of you paying the bank each month, the bank will actually pay you. The loan can be taken out as a lump sum, a fixed monthly payment or as a line of credit. You do not have to pay back the loan until you sell your home or move out permanently. There are many reverse mortgage lenders such as banks and credit unions that you can contact to obtain details about these loans. Rates may vary so you will want to check around with various banks before deciding. There are several types of reverse mortgage loans and they include the following:

Home Equity Conversion Mortgage – HECMs are the oldest types of reverse mortgage loans and the most popular. They are insured by the federal government through the Federal Housing Administration, which is part of the U.S. Department of Housing and Urban Development. The amount of money you can take out as a reverse mortgage loan depends upon your age, the appraised value of your home, current interest rates and the location of your home. The older you are and the higher the equity (what it would sell for less what you still owe), the higher the loan amount can be. For 2006, the loan limit for a home in a rural area is 200,160 while the limit for high cost areas is 362,790.

Another reverse home mortgage product that you can obtain from a lender is the Fannie Mae Home Keeper. Fannie Mae is the largest investor of home mortgages in the country and a major investor in reverse mortgages. Fannie Mae developed its own reverse mortgage product as an alternative to the HECM to address the needs of customers who had a higher property value on their home. Home Keeper loans can be larger than HECMs because their mortgage limit is higher. Another Fannie Mae reverse mortgage product is the Home Keeper for Home Purchase program. This is for seniors who wish to use the reverse mortgage loan to buy a new home. For example, let’s say someone sold his home for a 60,000 profit and wants to buy a new house for 100,000. He could get a reverse mortgage using money from a Home Keeper loan so he would not have to use his savings to purchase the more expensive home.

The opportunities are endless for borrowing against the equity in your home from reverse mortgage lenders you can depend upon.

Avoiding A Reverse Mortgage Scam

  • Posted on March 29, 2010 at 9:17 am

Reverse mortgages are gaining in popularity as more senior’s start looking for ways to supplement their retirement incomes. And as the interest in reverse mortgages increase, so are the cases of reverse mortgage fraud and scams. Many seniors are finding that they have been conned of their hard earned equity to these reverse mortgages scams. Since reverse mortgages typically involve your most valuable asset (your home), this type of fraud can have a serious effect on your retirement.

Reverse Mortgage Scams

The are several types of reverse mortgage scams that can end up costing you thousands and even tens of thousands of dollars in equity in your home if you become a victim.

Several estate planning companies have been charging thousands of dollars for information provided free from HUD. Typically these companies charge for this information as part of an estate planning program. Seniors that take up these programs are unaware that these firms are collecting huge sums of money by charging a fee of 6 to 10 percent of the total amount borrowed. HUD has recently issued a directive to lenders that issued reverse mortgages insured by the Federal Housing Administration (FHA) to stop doing business with these companies.

Pushing reverse mortgages as a way to pay for purchases

Some companies that sell large ticket items or services, like annuities or insurance products, may try to suggest using a reverse mortgage as a way fund these purchases.

When the extra cost of the reverse mortgage is hidden into the purchase, it often ends up costing the homeowner more than its benefits.

Unethical reverse mortgage terms

Some lenders slip in excessive fees and terms into their contracts. These terms can have a a detrimental effect on a Seniors’ equity. In some cases, lenders have used shared equity or shared appreciation terms, which gives the lender the right to collect a portion of the appreciation when the home is sold or refinanced. These type provisions can run into a cost of tens of thousands as the home appreciates in equity value. These rising cost provisions swallow up equity without providing any additional benefit to the homeowner.

Protecting yourself from reverse mortgage scams

If you are looking into reverse mortgages, there are several things that you can do to protect yourself from falling victim to these types of scams.

1. Contact a HUD approved reverse mortgage counselor. The counselor will help you understand reverse mortgages and help you evaluate your situation.

2. Obtain several offers from different reverse mortgage lenders in order to compare different options. The rule of thumb is to get three separate propsals in order to mark a good comparison.
3. You will need to understand all the terms and conditions within the reverse mortgage contracts with your mortgage counselor assisting you in elaborating the details.

4. You generally have 3 business days after signing the loan document to cancel it for any reason.

File a complaint with your State Attorney General’s office, banking regulatory agency and the Federal Trade Commission (FTC) at www.ftc.gov if you suspect that a company violating the law.

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