Reverse Mortgage Loans Help Homeowners Make the Most of Home Equity

After retirement, homeowners may be looking for ways to pay for all of their expenses. This is becoming more difficult in our current economy due to certain decreasing government benefits and unexpected pitfalls. Homeowners may be less prepared for retirement than they expected.

The Center for Retirement Research discovered that more than 60% of households are not prepared for retirement when it comes to their finances. Their research found that if older homeowners do not use the available equity in their homes, they are 10% more likely to be at risk for being financially unprepared. A reverse mortgage loan could be the answer homeowners are looking for because it can supplement their current incomes and allow them to live the lifestyles they had prior to retirement.

How This Type of Financing Works

Reverse mortgage loans are designed to give homeowners financial security and independence after retirement. This type of financing is unique because homeowners do not have to make any monthly mortgage payments. This is one less payment homeowners are responsible for and it allows them to put their money toward other required expenses or pleasure. As long as the homeowner lives in the home and meets the loan requirements, he or she will not have to make any payments on the loan.

If a homeowner has sufficient equity in his or her home, which is determined by an appraisal, that equity can be converted into cash. There are no restrictions on how the money is used, but often homeowners use the money to supplement their incomes. The amount of money a homeowner can receive depends on the value of the home, current interest rates, and his or her age. The homeowner can choose to receive the money in a a line of credit, monthly payments, a lump sum or a customized option that combines some of the options listed above.

In most cases, with this loan the homeowner will not owe more than the value of the home once he or she no longer occupies the residence. The loan will be repaid using the proceeds from the sale of the home. But, in the rare occasion when the loan balance exceeds the value of the home, and the homeowner’s heirs wish to retain ownership of the home, they will have to pay off the full balance of the loan.

Eligibility and Requirements for this Loan

To be eligible for this type of financing, the homeowner must be at least 62 years old and financing his or her primary residence. In order to meet the requirements of the loan, a homeowner must stay up to date on homeowner’s insurance, property taxes and home repairs. If any of these is not kept current, the homeowner will be required to pay back the loan in full.

All homeowners wishing to finance their homes with this loan will be required to attend reverse mortgage loan counseling before they can apply. The purpose of this counseling is to properly educate borrowers about this type of loan to determine if it is the best financing option for their situation. The counselor should inform the borrowers about all the costs associated with the loan and should be able to answer any questions borrowers may have.

Consider This Loan when Financing your Home!

This type of financing is not right for everyone, so it is important to understand the loan requirements and outcome. This loan will reduce the amount of equity in a home and will cause the homeowner to accumulate debt over time. But for many homeowners, the loan benefits far outweigh the cons, making these home loans the best solution for their financial needs. Retirement is a time to be enjoyed, and no one wants to be financially unprepared. Homeowners can use reverse mortgage loans to supplement their incomes and to live the lives they desire post-retirement.

Unraveling the Business Loan Process

Many times loan applications can be a daunting process. All the forms you have to fill out and make sure you sign can be very confusing. Sometimes, the loan process the lender has set up is different from the other procedures that they conform to, thus making it difficult for the borrower to understand the practices.

As a potential borrower, your expectations of the loan process should be clear. Any questions you have should be answered. If there are any questions about the loan application or the loan itself, this should be answered prior to the loan being granted. The loan officer and lending group are responsible for walking you through the loan process from the application until its approval. The process allows the lender to decide if you are worthy of the loan. The process includes the initial interview with the lender, the application, the review of your credit and the application, qualifying, processing all the documentation, underwriting the loan and a closing process.

The initial interview will allow you to explain your case to the lender. It will also give the lender a chance to interview you for your “character”. This is an important part of qualifying for the loan. The lender will help you work through your needs, answer your specific questions and find the loan that will work best for your situation. Qualifying for the loan is the next step. Your personal credit history is determined, the business’s credit history (if there is one) is analyzed, and your business plan, the amount of money you are willing to invest and your debt-to-credit ratio. All of these things will help determine, if the lender can give you a loan and what kind of loan you can qualify for your business. At this point, if you pre-qualify for a loan, you will fill out the application. As stated before, the lender should go through each step with you.

Included with a loan application, you may be asked to provide tax documentation records. The processing part of the loan includes the gathering and checking to make sure all the information is correct, accurate and available. This is to make the loan underwriters process simple. All the information is measure by the loan underwriter to determine the loan the borrower will receive. There are four features that the underwriter is looking for in a borrower: character, collateral, capacity and capital.

Character is important tool the underwriter uses to measure how willing you are to make your payments promptly. If there are issues with this part of your processing, your loan officer will assist in ways to make this meet their standards.

When funding a business or getting any other form of a loan, it is important that the borrower show that he/she has something to support the loan, if there is a default on the loan. Underwriters look for collateral to process the loan. Capacity is your ability to make the monthly payments on the loan. Pay stubs, income and cash flow statements will support this best. Capital is determined by the amount of money you have to put a down payment on the loan and covering any fees and closing costs.

Once the underwriter is complete in evaluating your documents, the loan is either approved or denied. If the loan is approved the loan officer will keep you abreast of all the process that follow, including signing and dating all the documents. If your loan is denied you will be informed in writing.

VA Loans Make Home Buying Easier!

There are many great reasons for borrowers to purchase a new home with a VA loan. This type of financing makes the home-buying process simpler by providing multiple benefits to the borrower, including relaxed eligibility requirements. These loans are specifically for veterans and men and women currently serving in the military.

This Type of Financing Helps Homeowners Save Money

Unlike other types of home loans that can require large down payments, this type of financing does not require the borrower to make any down payment on the home that he or she is buying. The absence of this typical requirement automatically saves the borrower money that can then be used for other expenses associated with buying a new home.

Usually, home loans require that the borrower pay mortgage insurance on the loan to cover costs in the case of default, but this type of financing does not require the borrower to pay any mortgage insurance. The VA guarantees repayment of these loans, so the lender is still protected in the event of a default. The absence of mortgage insurance also saves borrowers a great deal of money that they can use toward all of their other expenses.

These loans tend to have lower interest rates than many other types of home loans. With a lower interest rate, homeowners can obtain a lower monthly mortgage payments. Homeowners can save thousands of dollars and have more money available each month that they can put toward their other bills.

VA Loans Have Lenient Qualifications

The VA does not require borrowers to have certain credit scores or large incomes in order to qualify for this type of financing, but borrowers must have gone at least twelve months without having any delinquent payments in their credit histories. Many lenders will require that a borrower have a credit score of at least 620 to qualify. Borrowers also have to meet maximum debt to income ratio and minimum residual income requirements, (which vary based on family size and location) to show that they will be able to make their monthly payments.

Because these loans are solely for veterans and current members of the military, borrowers must also meet service length requirements, which vary based on year of enlistment and certain other factors. Veterans must have been discharged under conditions other than dishonorable to be eligible for this loan. In certain cases, spouses of veterans may also qualify for this type of financing.

Buy Your New Home with a VA Loan!

These loans can save homeowners thousands of dollars, which is great news for first-time home buyers who are just starting out or for veterans returning home who want to simply get back to everyday life. First-time home buyers can also take advantage of the first-time homebuyer’s tax credit along with their VA loans and receive up to $8000 in tax credits! This incentive will be over at the end of April, so first-time home buyers should act now to save even more money with their new homes!