My Florida Home Builder

As you head into your retirement years, you need to figure out how to generate income. Reversing your mortgage is one option that has become popular, but is also very controversial.

The reverse mortgage is a form of negative amortization, but with a favorable side effect. While you make payments to a lender with a traditional home loan, the lender makes payments to you with a reverse loan.

The reverse mortgage is based on the equity in your home. Every time the lender makes a payment to you, it gets a bit of your equity. This equity is held as debt like in a traditional mortgage and interest is charged on the amount.

A thought that may have popped into your mind is what ultimately happens when the equity in the home is used up? If there is no equity, do you still own the home? Are you expected to pay off the loan? Do you get evicted?

When the equity ran out, the very first reverse mortgages often had clauses that allowed the homeowners to be removed from the property. Yes, it was ugly. Most current programs allow you to remain in the home, but read the fine print of yours.

Another common question is how big will the monthly payments made by the lender be? There are a number of factors that go into the determination. These include the amount of equity in your home, the interest rate charged on the loan, the costs and the fees.

Finally, the biggest factor is the particular plan you choose. You will have a choice of different options that produce different payments and so on. The situation is similar to the one in which you decide upon a mortgage for a home you buy.

At some point in time, you might realize a reverse mortgage is not for you. Can you get out of it? Generally, you can so long as you pay off the mortgage debt. Make sure to read the loan documents for language on this issue.

Real estate is beautiful because it appreciates most of the time. After getting a reverse mortgage, can you still tap this appreciation? The answer is usually yes, but you may have to refinance the property to do so.

If the program works well, you will pass away before the equity in your home runs out. Odd to say that, but it is true. At that time, your home will pass to your heirs who will either pay off the mortgage or sell the home.

The reverse mortgage is often touted as a great way to pull income from real estate. In truth, it is a very expensive method for doing this and there are better options. Make sure to speak with a financial advisor before going this direction.

As you head into your retirement years, you need to figure out how to generate income. Reversing your mortgage is one option that has become popular, but is also very controversial.

As the name suggest, this is a loan wherein you receive payments from a lender instead of making them. The rest of the loan, however, is much different than your run of the mill mortgage.

The reverse mortgage is based on the equity in your home. Every time the lender makes a payment to you, it gets a bit of your equity. This equity is held as debt like in a traditional mortgage and interest is charged on the amount.

A thought that may have popped into your mind is what ultimately happens when the equity in the home is used up? If there is no equity, do you still own the home? Are you expected to pay off the loan? Do you get evicted?

When the equity ran out, the very first reverse mortgages often had clauses that allowed the homeowners to be removed from the property. Yes, it was ugly. Most current programs allow you to remain in the home, but read the fine print of yours.

Considering you are giving away a big chunk of your nest egg, you should get some sizeable payments, right? Well, maybe. There are a lot of factors involved. These include the dollar value of your equity, your age and so on.

Finally, the biggest factor is the particular plan you choose. You will have a choice of different options that produce different payments and so on. The situation is similar to the one in which you decide upon a mortgage for a home you buy.

So, can you change your mind and go in a different direction? Yes. In doing so, however, you have to either sell your home to pay off the reverse mortgage or simply pay it off outright.

Real estate is beautiful because it appreciates most of the time. After getting a reverse mortgage, can you still tap this appreciation? The answer is usually yes, but you may have to refinance the property to do so.

So what happens when you reach the end of the line? In such a situation, the home is handled just like one with a traditional home loan. Your heirs will either sell it or come up with the money to pay off the reverse mortgage.

In some cases, the reverse mortgage makes sense. In others, it does not. The only way to make a determination is to discuss the details with a financial professional.

Yesterday I received the following question from K.S. who lives in Antelope, California. I want you to know I get this question over and over. It is one of my pet peeves because there is absolutely no reason for it to be such a frustrating reality to so many people applying for a mortgage. Here’s the question:

“how long do i have to wait for underwriting???? i have been waiting week after week. he said completion review would be complete the 19th after last week he said 48 hrs .. last message he sent said he would know more on the 19th …gr”

My Answer:

How long does it take? Time in underwriting depends on the lender, the type of loan, the issues that need to be resolved, and how saturated the market is. It can take 1 week or up to 6 weeks which I would hope is worse case, but, I have seen it take longer in extreem cases with severe issues.

I don’t know what the issues are on your loan or what type of loan you are qualifying for. However, your loan officer does!

Sometimes the problem of time is an issue of “when it was REALLY submitted” to the underwriters or what issues still need to be resolved. Your loan officer needs to be totally up front with you. If you don’t think he is, ask to speak with his broker/manager.

I’m serious about this issue. You need FACTS! Ask exactly when it was submitted. If it has been more than two weeks, you have a right to know exactly why. Ask for documentation. No kidding. It is your loan and you are paying them a lot of money to broker it. You should demand, without being arrogant, real and true information.

Get back to me if you need to. Connie.

While I was talking with K.S. I found that the Company she is doing business with is one of, if not the largest Lender in the US. I also learned that K.S. is applying for an FHA Mortgage and in all fairness these loans do take a little longer to close.

I’ve been in the business for a long time and have pretty much seen it all. I know often times an incomplete loan package is submitted to underwriters. I know that there can be issues with appraisals or titles that can take time to correct. Sometimes a simple VOE will take longer than it should. Sometimes the borrower’s file may be weak in some areas and the underwriter may ask for more documentation. They have the authority to do that.

The worse thing that happens is when the package just doesn’t qualify under that specific lenders guidelines. Now the loan officer panics and starts sending it out to numerous other lenders while he literally prays that one of these lenders will approve it. The loan officer is hoping that perhaps their guidelines are not as tight. We have all been there. Every now and then it works, … but at this point it is usually a lost cause. We find ourselves in a state of denial and just can’t let it go because our heart is broken for the borrower and the seller.

All of these scenarios are reality and do take time. The problem I have is that while all this is going on the borrower is left in the dark. That is just plain wrong.

Many borrows don’t understand all the steps we go through or the documentation process. However, it is their loan. They are paying a lot of money for this process and we owe it to them to keep them informed about any problems or issues that arise. The borrower is part of the process. If they don’t understand then we must explain it so they do. Our avoidance of the issue and reluctance to inform the borrower puts them through a large amount of anxiety and stress.

Borrowers, people, you and I, … all expect to be treated with dignity and respect. We expect honesty from the people we do business with and we expect the people we are doing business with to have integrity and compassion. Pretty simple, huh? So why don’t people get it right?

A loan officer has an obligation to keep the borrower, seller and real estate agent informed at all times.

Alright, I’m Done. I do hope I don’t get this question again for at least a week!