The Reverse Mortgage (RM) is one solution for homeowners who are looking for a way to access the equity in their homes without taking on more debt.
An RM is also known as a Home Equity Conversion Mortgage (HECM), where the borrower can pull a specific amount of equity out of the property.
No payments are made to the lender until the borrower either passes on or permanently moves out of the property.
Borrowers must be a minimum of 62 years of age to participate, and they are eligible to receive a percentage of the equity in the property. The older borrowers are, the more equity they are eligible to receive.
If there are liens on the property, they are typically rolled into the RM, so it is the only lien on the property.
Other than pulling title on the property, and running a credit report on the borrower or borrowers, there is very little in the way of documentation that the borrower needs to provide at application or later in the process.
Borrowers can receive a lump sum at closing, in monthly payments or as a line of credit to be accessed when needed.
Those interested in getting an RM are required by the Department of Housing and Urban Development to attend a counseling session separate from the mortgage professional. It gives them an opportunity to ask questions.
For more information, borrowers should contact their mortgage professional.
It’s no secret there will be fallout from the generally poor economic environment we’ve all lived through over the past few years. As a result, you may be wondering what the current guidelines are with regard to purchasing a home after either a bankruptcy or a foreclosure.
For starters, it’s important to note that guidelines for conventional financing through Fannie Mae and Freddie Mac are different than guidelines for Federal Housing Administration (FHA) loans.
It can be difficult getting a mortgage with adverse credit terms. Before starting the process, it’s important to know the lay of the land.
The following information may help:
There are two types of bankruptcies that people can go through, regardless if they own a home. They are Chapter 7 and Chapter 13. In Chapter 7, debt is wiped clean from the record. In Chapter 13, some type of payment plan is put into place to repay the debt
Conventional lenders will look at finances for at least four years after the dismissal date of either type of bankruptcy, while the FHA will look at two. Both depend on you having a solid credit history since the bankruptcy.
Some FHA borrowers with a Chapter 13 bankruptcy may be able to get a mortgage if they can prove to the lender, via the court system, that payments have been made in a satisfactory manner for a minimum of 12 months.
The FHA is generally looking for three years from the completion date of a foreclosure before a purchaser can buy again. With conventional financing it is five years.
A deed in lieu of foreclosure will make you eligible for an FHA mortgage in three years as well.
This is where – instead of going through the foreclosure process – the owner agrees to give back the property to the lender in exchange for keeping a foreclosure off of their credit report.