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Reverse Mortgages
Reverse Mortgage
What Is A Reverse Mortgage And Other Frequently Asked Questions
If you are 62 or older, a reverse mortgage is a great way to take advantage of the equity in your home without having to sell your home, and eliminate your monthly mortgage payment.
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What is a reverse mortgage?
A reverse mortgage loan is different than a traditional mortgage. With a traditional mortgage loan you make monthly mortgage payments, but with a reverse mortgage loan the lender pays you money through monthly installments, a one-time lump sum payment, a line of credit or a combination of a line of credit and monthly installments. The money that you receive is dependent on your age, the value of your home and the current interest rate.
You keep the title to your home. Your home is part of your estate. You are simply using the reverse mortgage to pull equity from your home.
What is the advantage of a reverse mortgage?
The biggest advantage of a reverse mortgage are the payments to you! You can receive a lump sum, monthly installments, a line of credit, or a combination of payment types.
Another advantage of a reverse mortgage loan is that you are not required to pay the loan back until the home is no longer your primary residence or you fail to maintain the home, or fail to pay property taxes and/or homeowner's insurance or do not otherwise comply with the terms of the loan.
If you’re aged 62 or older and own your home you might be eligible for a reverse mortgage loan. Contact us to find out more about reverse mortgage loans and ways to make it work for you.
Why would I avoid a reverse mortgage?
You would rather leave the equity for your heirs
Reverse mortgages allow you to pull equity from a home. Once that equity is converted to cash, it is no longer there for your heirs. When they sell they home or if they decide to keep the home, they must repay the balance of the equity owed on the home.
You live with someone who is under 62
If a borrower dies, sells their home, or moves out, the loan immediately becomes due. One solution is to list your boarders on the loan paperwork; however, no one living with you under the age of 62 may be a borrower on the reverse mortgage.
If you are planning or unexpectedly need to move
You must be healthy enough to continue dwelling within the home. If your health declines to the point where you must relocate to assisted living, the loan must be repaid in full, as the home no longer qualifies as a primary residence.
Moving into a nursing home or an assisted living facility for more than 12 consecutive months is considered a permanent move under reverse mortgage regulations. For this reason, borrowers are required to certify in writing each year that they still live in the home they're borrowing against, in order to avoid foreclosure. you’re contemplating moving for health concerns or other reasons, a reverse mortgage is probably unwise because in the short-run, steep up-front costs make such loans economically impractical.
If you would like more information about reverse loan options, contact us today! Or start your loan application.
How does a reverse mortgage work?
The FHA-insured HECM (reverse mortgage) has a formula to determine the amount you are eligible to borrow.
The amount available is dependent on several factors:
- Your age
- The value of your home
- The current interest rates and terms being offered by lenders
These factors determine your limits and the amount you can borrow. The formula represents the maximum amount FHA has determined you may borrow with a Reverse Mortgage. Note, all liens must be paid off, and any fees/costs associated with your loan must be paid off. The remaining funds can be distributed a few different ways.
- Lump Sum
- Line of Credit
- Monthly Payments
- Some combination of the three options above
The loan is due when a repayment event occurs. This may include:
- Death of the last surviving borrower on the loan
- Borrowers permanently moving out of the home
- Borrows failing to live in the home for 12 consecutive months
- Failure to pay property taxes or insurance
- Failure to maintain the property
You still have the right to sell your home at anytime. Proceeds from the sale will first payoff your current balance. The remaining funds are yours. There is no prepayment penalty.
If you would like more information about reverse mortgage loan options, contact us today! Or start your reverse mortgage application.
When a property appraisal comes in lower than the agreed-upon purchase price, it can complicate financing for the buyer. Here's what typically happens for FHA, Conventional, and VA mortgages: 1. FHA Mortgages Impact of a Low Appraisal: The loan amount is limited to the lower of the purchase price or the appraised value. A low appraisal means the buyer must: Renegotiate the purchase price with the seller. Pay the difference in cash. Walk away if the contract allows it. Required Repairs: FHA appraisals assess both value and property condition. If issues arise (e.g., safety concerns), the seller or buyer must make repairs before closing. Appraisal Stays with the Property: FHA appraisals are tied to the property for 120 days. If a different FHA buyer comes along within that period, they inherit the appraisal value. 2. Conventional Mortgages Impact of a Low Appraisal: Conventional loans also limit the loan amount to the appraised value. If the appraisal is low, the buyer must: Negotiate a lower price with the seller. Increase their down payment to cover the gap. Cancel the deal if allowed by a financing contingency. Appraisal Appeal or Second Appraisal: Buyers or lenders can challenge the appraisal or request another one if there’s evidence the appraisal was inaccurate. More Flexibility: Conventional loans often have fewer property condition requirements than FHA or VA loans, so the appraisal focuses more on market value. 3. VA Mortgages Impact of a Low Appraisal: VA loans use a Notice of Value (NOV) to determine the property’s worth. If the NOV is lower than the purchase price, options include: Negotiating a price reduction with the seller. Paying the difference in cash. Requesting a "Reconsideration of Value" (ROV) through the VA if there’s a strong case for higher value. VA Escape Clause: VA loans include a clause allowing buyers to walk away if the property appraises lower than the purchase price without forfeiting their earnest money deposit. Minimum Property Requirements (MPRs): If the property doesn't meet VA MPRs, repairs are required before closing. General Buyer Options in Case of a Low Appraisal: Renegotiate Price: Sellers may agree to lower the price to match the appraisal. Bring Extra Cash: Buyers can cover the gap out-of-pocket. Challenge the Appraisal: Provide additional data to support a higher value. Walk Away: Utilize financing or appraisal contingencies to exit the deal. Would you like more details on how to handle a specific type of mortgage? tune in and learn at https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329
 ender's 1% Down Payment program is designed to make homeownership more accessible for eligible first-time buyers by lowering the upfront costs typically required for a mortgage. Here's a breakdown of how the program generally works: How It Works 1% Down from the Borrower: The borrower contributes just 1% of the home purchase price as a down payment. 2% Contribution from Lender: Lender covers an additional 2% of the down payment, allowing the borrower to start with a total of 3% equity in the home. Eligibility: Borrowers must meet certain income and credit score requirements. The program often targets lower-income buyers or those who qualify for special financial assistance. Key Features and Benefits Low Entry Barrier: The reduced down payment can make homeownership achievable sooner for first-time buyers or those with limited savings. Conventional Loan: The loan is structured as a conventional mortgage, which may help borrowers avoid some of the restrictions associated with government-backed loans like FHA loans. Potential Mortgage Insurance: Depending on the loan details, borrowers may need to pay private mortgage insurance (PMI) until they reach 20% equity. Other Considerations Interest Rates: Rates and terms are subject to typical mortgage rate changes, so it's advisable to check the current rate before applying. Credit Requirements: There may be a minimum credit score requirement, though this is typically more flexible than for standard conventional loans. The 1% Down program can be an excellent option for buyers looking to make homeownership more affordable. tune in and learn at https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329
 ender's 1% Down Payment program is designed to make homeownership more accessible for eligible first-time buyers by lowering the upfront costs typically required for a mortgage. Here's a breakdown of how the program generally works: How It Works 1% Down from the Borrower: The borrower contributes just 1% of the home purchase price as a down payment. 2% Contribution from Lender: Lender covers an additional 2% of the down payment, allowing the borrower to start with a total of 3% equity in the home. Eligibility: Borrowers must meet certain income and credit score requirements. The program often targets lower-income buyers or those who qualify for special financial assistance. Key Features and Benefits Low Entry Barrier: The reduced down payment can make homeownership achievable sooner for first-time buyers or those with limited savings. Conventional Loan: The loan is structured as a conventional mortgage, which may help borrowers avoid some of the restrictions associated with government-backed loans like FHA loans. Potential Mortgage Insurance: Depending on the loan details, borrowers may need to pay private mortgage insurance (PMI) until they reach 20% equity. Other Considerations Interest Rates: Rates and terms are subject to typical mortgage rate changes, so it's advisable to check the current rate before applying. Credit Requirements: There may be a minimum credit score requirement, though this is typically more flexible than for standard conventional loans. The 1% Down program can be an excellent option for buyers looking to make homeownership more affordable. tune in and learn at https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329
 The FHA 203(h) program is a Federal Housing Administration (FHA) loan specifically designed to help people affected by natural disasters, like hurricanes, purchase or rebuild a home. It provides an accessible way for victims of federally declared disaster areas to find stable housing quickly by offering favorable terms compared to traditional mortgages. Here’s a breakdown of how it works and its benefits: Key Features of the FHA 203(h) Loan Eligibility Requirements: You must be a homeowner or renter whose home was destroyed or severely damaged in a disaster within a federally declared disaster area. Typically, you need to apply within one year of the disaster declaration. Loan Coverage: You can use the FHA 203(h) to purchase a new primary residence or rebuild an existing one if your previous home was destroyed. It’s available for both single-family homes and approved condominiums. Benefits of the FHA 203(h) Program: No Down Payment Required: Unlike traditional FHA loans that require a 3.5% down payment, the 203(h) program allows qualified borrowers to finance 100% of the home’s cost, which can be helpful during times of financial stress. Lower Credit Score Flexibility: FHA loans generally have flexible credit requirements, and the 203(h) is no exception. The credit standards might be more accommodating due to the circumstances, though some lenders may impose their own minimum scores. Potential Waiver of Mortgage Insurance Premiums (MIP): Some lenders may waive upfront MIP payments under this program. However, it’s common for standard FHA loans to have monthly premiums. Refinance Option: If your damaged home needs repairs and you want to keep it, you can combine the FHA 203(h) with a 203(k) loan to finance both the purchase and repair costs. Loan Limits: The FHA 203(h) is subject to standard FHA loan limits, which vary by county and property type. Documentation: Lenders will require proof that you lived in the disaster area, typically through utility bills, lease agreements, or similar documents. You’ll also need proof of disaster loss, such as insurance claims, FEMA assistance documentation, or other relevant records. Steps to Apply Contact Lenders Familiar with FHA 203(h) Loans: Not all lenders offer this program, so find one experienced with disaster recovery loans. Gather Required Documentation: Make sure to have your identification, proof of residency in the disaster area, proof of loss, and any FEMA assistance documents. Consider FHA 203(k) Combination: If you want to buy a damaged home and repair it, discuss combining with an FHA 203(k) for renovation financing. Potential Drawbacks While the program is beneficial, keep in mind that: The loan amount is capped by FHA limits, which may not be enough in higher-cost areas. Mortgage insurance premiums can increase monthly payments, even if the upfront premium is waived. The FHA 203(h) can be a strong tool for those affected by natural disasters, providing quick access to housing and flexible financing terms at a time when resources might be limited. tune in and learn at https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329
A second mortgage for an investment property is a loan taken against the equity in a property you already own, specifically one that is not your primary residence. It allows you to tap into the equity of the investment property to finance other expenses, like renovations, additional property purchases, or paying off higher-interest debt. Here are key points to consider: 1. Understanding Second Mortgages Definition: A second mortgage is a loan that uses the equity in a property as collateral. It is subordinate to the first mortgage, meaning if you default, the first mortgage is paid off before the second mortgage. Types: The two main types are home equity loans (lump-sum payments) and home equity lines of credit (HELOCs), which function like a credit line. 2. Why Consider a Second Mortgage on an Investment Property? Leverage Equity: Utilize built-up equity to finance the purchase of another investment property or make improvements. Lower Rates Compared to Other Loans: Interest rates on second mortgages can be lower than other loan types, such as personal loans or credit cards. Interest Deductibility: Mortgage interest may be tax-deductible if the funds are used to buy, build, or substantially improve the investment property. 3. Challenges and Risks Higher Interest Rates: Because investment properties carry more risk for lenders, second mortgage interest rates are often higher than for primary residences. Stringent Qualification Requirements: Lenders typically require higher credit scores, a significant amount of equity, and lower debt-to-income ratios. Risk of Foreclosure: If you cannot make the payments, you risk losing the property since it serves as collateral for the loan. 4. Qualifying for a Second Mortgage on an Investment Property Equity Requirements: Most lenders require at least 20-30% equity in the property. Credit Score: A credit score of 680 or higher is usually necessary, but some lenders may have stricter requirements. Income Verification: Lenders will want to verify your income to ensure you can cover payments for both the first and second mortgages. 5. Alternatives to a Second Mortgage Cash-Out Refinance: Replace your existing mortgage with a new, larger loan, using the extra funds for other investments. Personal Loans: These may have higher interest rates but don't require using your property as collateral. Private Lenders or Hard Money Loans: Typically easier to qualify for but come with higher interest rates and fees. 6. How to Use the Funds Wisely Renovations: Improving the property can increase rental income and resale value. Purchasing Additional Properties: Using the equity to buy another investment property can grow your portfolio. Debt Consolidation: Pay off higher-interest debt to improve cash flow. tune in and learn at https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329
After a hurricane, the process of closing on a mortgage may be impacted due to potential damage to the property or delays caused by the storm's aftermath. Here are the next steps to take: 1. Assess Property Damage Inspect the Property: The first step is to assess if the property sustained any damage during the hurricane. This can be done by the buyer, seller, or a licensed inspector. Some lenders may require a re-inspection before closing. Appraisal Updates: If there is significant damage, the lender may need a new appraisal to determine the property's current value. 2. Review Insurance Requirements Homeowners Insurance: Make sure the homeowners insurance policy is active and covers the damage caused by the hurricane. Lenders require insurance to protect their investment. Flood Insurance: If the property is in a flood-prone area, lenders may require flood insurance before closing. Confirm that this coverage is in place. 3. Communicate with the Lender Discuss the Situation: Contact the lender to discuss any necessary extensions or changes to the loan terms due to the hurricane. Some lenders may offer flexibility in the closing process. Updated Paperwork: Additional documentation or updates may be required if the closing date changes. 4. Repair or Re-Negotiate Repair the Damage: If there is damage, determine who will cover the cost. The seller may need to make repairs, or the buyer and seller can negotiate a new agreement. Re-Negotiate the Purchase Agreement: If repairs cannot be made before closing, the buyer may ask for concessions, such as a price reduction or repair credits. 5. Schedule a Final Walk-Through Verify Repairs: If any repairs were made, schedule a final walk-through to ensure everything is in order before closing. Confirm the Property's Condition: Make sure the property is still in the condition agreed upon in the contract. 6. Reschedule the Closing New Closing Date: Coordinate with all parties to set a new closing date if the original was delayed. Complete Closing Paperwork: Sign all documents and finalize the loan as per the new schedule. Staying in close contact with your lender, real estate agent, and insurance company throughout this process is essential for a smooth closing after a hurricane. Tune in and learn at https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329
The Federal Reserve influences interest rates in the economy, but its actions may not always align with the actual rates individuals or businesses experience in the market. Even if the Fed cuts its benchmark interest rates, other factors can cause rates, such as mortgage rates or bond yields, to rise. Here are some key reasons why rates might go up despite Fed rate cuts: 1. Inflation Concerns: If inflation expectations are rising, lenders demand higher interest rates to compensate for the loss of purchasing power. Even with a Fed cut, inflationary pressures may push long-term rates up as investors seek higher returns to protect against inflation. 2. Economic Outlook: Markets may interpret a Fed rate cut as a signal of economic weakness. If investors are concerned about future growth or financial stability, they may sell bonds or other interest-rate-sensitive assets, causing yields (interest rates) to rise. 3. Bond Market Dynamics: The Federal Reserve primarily controls short-term interest rates, but long-term rates (e.g., mortgage rates) are influenced by the bond market. If investors sell bonds due to concerns like inflation, higher deficits, or geopolitical risks, bond prices fall and yields (long-term rates) rise. 4. Supply and Demand for Credit: If the demand for borrowing increases, banks may raise interest rates to balance supply and demand. Conversely, if banks perceive increased risk in lending (for example, during uncertain economic times), they might increase the rates they charge to mitigate potential losses. 5. Global Factors: International economic conditions, such as rising global interest rates or capital outflows from the U.S. to other countries, can push up domestic interest rates. For example, if rates rise in other countries, U.S. rates might rise to remain competitive and attract investment. 6. Federal Reserve Policy Expectations: If markets believe that the Fed’s rate cut is temporary or that future inflationary pressures will force the Fed to raise rates again soon, long-term rates might increase in anticipation of those future rate hikes. While the Fed can reduce its benchmark rate, the overall interest rate environment is influenced by broader economic factors, market expectations, and global dynamics. Download the latest iOS or Android app to try advanced voice mode Get more natural, real-time conversations with advanced voice. Senses and responds to humor, sarcasm, interruptions, and more. tune in and learn at https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329
Purchasing flood insurance, even if you're not in a designated flood zone, can be a wise decision for several reasons: 1. Floods Can Happen Anywhere Floods are not confined to high-risk zones. In fact, more than 20% of flood insurance claims come from properties outside of high-risk flood zones. Severe storms, hurricanes, or even rapid snowmelt can lead to flooding in areas considered low or moderate risk. 2. Climate Change and Unpredictability Climate change is making weather patterns more unpredictable. Areas previously unaffected by floods may become vulnerable due to changing rainfall patterns or rising sea levels. This increased uncertainty makes flood insurance a useful safeguard. 3. Relatively Low Cost in Low-Risk Areas Flood insurance is usually less expensive for homes outside high-risk flood zones, so purchasing a policy can provide significant protection at a reasonable cost. Compared to high-risk zones, where premiums can be higher, the cost-to-benefit ratio is often better in low-risk areas. 4. Homeowner’s Insurance Doesn't Cover Floods Standard homeowner’s insurance policies do not cover flood damage. Without separate flood insurance, homeowners must bear the full cost of any flood-related damage, which can be substantial. 5. Federal Disaster Assistance Is Limited Many people assume that in the event of a disaster, federal assistance will cover their losses. However, federal disaster aid is often in the form of low-interest loans, not grants, and must be repaid. Flood insurance offers more comprehensive coverage and quicker financial relief. 6. Increasing Property Value Some homebuyers may prefer a property with existing flood insurance, even if it's in a low-risk zone. This could make your home more attractive if you decide to sell. Purchasing flood insurance, even if you're not in a designated flood zone, provides financial protection and peace of mind, especially in the face of increasingly unpredictable weather patterns. tune in and learn at https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329 
Followi When the Federal Reserve (Fed) cuts interest rates, it is usually intended to stimulate economic activity. Here's what typically happens when the Fed lowers its benchmark interest rate: 1. Lower Borrowing Costs For Consumers: Lower rates make borrowing cheaper for consumers, particularly for loans such as mortgages, car loans, and credit cards. This often leads to increased spending and investment by consumers, which can boost economic growth. For Businesses: Companies can borrow at lower rates to invest in new projects, hire more workers, and expand operations. Lower borrowing costs can encourage business growth and investment. 2. Increased Consumer Spending Lower interest rates reduce the cost of borrowing, encouraging consumers to finance purchases, especially of big-ticket items like homes and cars. This increased demand for goods and services can help boost the economy. 3. Encouraging Investments Stock Market: Lower interest rates can make stocks more attractive compared to bonds or savings, as the yield on safer assets decreases. This can push stock prices higher, as investors seek higher returns from equities. Business Investment: Lower borrowing costs can prompt businesses to expand by purchasing new equipment, hiring more employees, or pursuing new ventures, which in turn stimulates economic activity. 4. Weaker Currency Lower interest rates can weaken the U.S. dollar in international markets because investors may seek higher returns in other currencies. A weaker dollar makes U.S. exports more competitive abroad, which can help boost domestic manufacturing and the economy. 5. Stimulates Inflation When borrowing becomes cheaper, demand for goods and services can increase, leading to higher prices. The Fed typically lowers rates when inflation is low or economic growth is sluggish. If demand rises faster than supply, inflation may increase, which is one goal if the economy is too slow. 6. Lower Savings Returns Savings accounts, certificates of deposit (CDs), and other fixed-income investments typically yield lower returns when rates are cut. This can push savers to spend more or invest in higher-risk assets like stocks to achieve better returns. 7. Boost the Housing Market Lower interest rates make mortgages cheaper, potentially driving up home sales and home prices as more people can afford to buy homes. 8. Employment Growth Lower borrowing costs for businesses may lead to more hiring, as companies can finance expansions or projects at a cheaper rate. This can reduce unemployment rates and increase overall wages over time. 9. Risk of Overheating If the Fed cuts rates too aggressively, it could lead to excessive borrowing and spending, which might cause inflation to rise too quickly, creating the risk of an overheated economy. Why the Fed Cuts Rates The Fed typically lowers interest rates during periods of economic slowdown, recession, or low inflation to encourage economic activity. Conversely, it raises rates when inflation becomes a concern or when the economy is growing too quickly. In summary, a Fed rate cut is meant to stimulate the economy by making borrowing cheaper, encouraging consumer and business spending, and promoting investment. However, it can also carry risks, such as inflation and asset bubbles. tune in and learn at https://www.ddamortgage.com/blog didier malagies nmls#212566 dda mortgage nmls#324329
