A reverse mortgage loan can be very beneficial for the financial security of qualified seniors. The funds from a reverse mortgage loan can be used to pay for medical care, supplement retirement income, pay off an existing mortgage and other debt, make home improvements or repairs, or save for that rainy day fund.
According to Daily Finance: “Many Americans struggle to make ends meet during their retirement. A third of all retirees now get 90 percent or more of their income from Social Security, according to figures from Boston College’s Center for Retirement Research. For those fortunate enough to own their homes, a reverse mortgage can be an option that can supplement Social Security and other income sources.” If you are having trouble making ends meet and need a more secure financial future, a reverse mortgage loan could be an excellent solution.
To be eligible for a reverse mortgage loan, the youngest borrower on title must be at least 62 years old and borrowers must either own their home outright or have sufficient equity in their home. Borrowers cannot be delinquent on any federal debt and must live in the home full time as their primary residence. Additionally, the property must meet specific requirements. The home must be a single family home, a two to four unit home where the owner occupies one unit or an FHA approved condominium or manufactured home that meets FHA requirements. Borrowers are also required to pay property taxes and insurance, any HOA fees and maintain the home according to Federal Housing Administration (FHA) guidelines.
Deciding whether to obtain a reverse mortgage loan is a big decision, so choosing a reverse mortgage lender is an important part of the process. The Federal Trade Commission (FTC) recommends the following steps before choosing a reverse mortgage lender.
- Check rates. Mortgage Insurance Premiums (MIPs) are set by the FHA and are the same for all lenders; however origination fees and interest rates may vary by lender. Closing costs are set by third party vendors and servicing fees are set by the company servicing the loan.
- Decide what kind of reverse mortgage loan is best for you. Side-by-side comparisons may be helpful. Reverse Mortgage counselors and your Loan Officer will be able to assist you if you have questions.
- Know the TALC Rates. Clearly understand what requirements need to be followed to prevent the reverse mortgage loan from becoming due. Counselors and lenders will be able to explain the total annual loan cost (TALC) rates that show the estimated annual average cost of the loan.
- Understand your options. If you are planning to use your reverse mortgage loan proceeds for home repairs or improvements or need assistance paying your property taxes, contact your local Area Agency on Aging to see if you may qualify for a low cost single purpose loan in your area. Visit www.eldercare.gov for more information on Area Agencies on Aging.
The Federal Housing Administration (FHA) keeps an updated list of FHA-approved reverse mortgage lenders for your review.
To help ensure that you work with an experienced, legitimate and professional lender, choose an organization with a high Better Business Bureau rating and membership in the National Reverse Mortgage Lenders Association (NRMLA). NRMLA requires that lenders adhere to a strict set of values that include fairness, confidentiality, integrity, competence, diligence and professionalism through rules such as: “NRMLA Members shall not, directly or indirectly, solicit or communicate with consumers through false or misleading or deceptive or unfair communications or advertisements or in any manner inconsistent with applicable law” and “NRMLA Members shall take reasonable steps (including implementing appropriate training and compliance procedures) to help assure that the privacy of and confidentiality of information obtained from and about consumers is respected, protected, honored and safeguarded, and shall do so in a manner consistent with applicable law” among many more.
For more information about reverse mortgage loans and which loan option might be right for you, please call 866 404.6138.