Mortgage Industry News - Today’s Talk on Refinancing, Home Loans, and more

Reverse Mortgage Line of Credit that Grows

Choosing your payment option may seem to be an easy task, especially when you are aware of your particular needs and wants at the time your funds are released.  But did you know you can chose a line of credit and make your money grow?  Yes it is true.  The equity line of credit grows at a rate of 0.5% plus current monthly interest rate being charged on the loan.  Do not be confused and think the interest is earned but rather it is accrued monthly and only used on unused money from your reverse mortgage. 

The reverse mortgage program is also call the HECM or the Home Equity Conversion Mortgage program.  This program was designed to assist mature Americans or borrowers who are 62 years of age and older to use the equity in their home to supplement their monthly income.  The program has been around for approximately 20 years and until recently the participation has increased and at least 66% of its participants choose to use the equity line of credit. 

So how will the program work for you?  If you have any unused money from your reverse mortgage proceeds and you have selected the equity line of credit payment option then all you have to do is retain the unused portion and watch it grow.  Of course there are some additional stipulations such as:

·         All federal insurances such as your homeowner’s insurance and flood insurance must be maintained and paid in order to keep your money available to you.  Because the HECM program is federally backed by Federal Housing Authority (FHA) and the Housing of Urban Development (HUD) and often serviced by federal mortgage companies such as Fannie Mae, the insurances on all loans must be paid in order to keep your money coming to you.

·         Fortunately, because the program is federally supported your money cannot be frozen or closed while you have a balance in the equity line of credit account.  While many other banks are closing or freezing their customers lines of credit the HUD and FHA wants to ensure you are able to receive your money.  After all the reverse mortgage program pays you for participating as long as you stay in your home.

·         Your unused money does not accrue interest.  That’s right you do not have to pay interest on the money you are not using.  You only have to pay interest for the money you have used. 

Your money is accessible when you need it in an equity line of credit, which gives you the freedom to plan for your financial independence.  The equity line of credit, like the monthly payments, is not available with the fixed interest rate reverse mortgage program.   You only receive these payment options with the adjustable interest rate reverse mortgage.  The only payment option available for the fixed interest rate reverse mortgage is the lump sum option. 

A thirteen-year veteran of the mortgage industry, Robert Griffin specializes in reverse mortgages and has earned the accolade of No. 1 reverse mortgage broker in the Southwest for three years in a row. The owner of Griffin Financial Mortgage LLC, based in Fort Worth, Texas, his memberships include the National Association of Mortgage Brokers (NAMB), the Mortgage Bankers Association (MBA), the National Reverse Mortgage Lenders Association (NMRLA) and the Better Business Bureau (BBB). Robert Griffin is also co-author of “62 Senior Moments.” If you would like an information packet or would like to set up an appointment with one of our Reverse Mortgage Specialists,  Please call (866) 683-3690 or view our website at www.ReverseMortgage360.com.

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What to Expect in a Short Sale

You’ve probably heard that there are some amazing deals out there on distressed properties. Reports of people snapping up bargains on short sales may have whetted your appetite for purchasing a home despite the troubled economy.

 

A short sale occurs when a lender allows a home to be sold for less than the amount owed on a mortgage loan. Selling a home this way can help a homeowner avoid foreclosure, while allowing the bank to recover some of what it is owed. A successful short sale can be a win-win situation for everyone involved. However, these transactions often come with a host of problems, so it’s important to know how the process works before committing to one. Here are some things to expect:

 

  • The lender must approve a short sale. Even if you and the seller have agreed upon a fair price, the deal could be held up or killed if the bank balks at the price. You can make your offer for a home contingent upon the bank’s approval.
  • Short sales can stretch out for many months. Despite the name, short sales aren’t known for being completed quickly. Delays can occur for a variety of reaons. Among the things that can hold up a deal are problems with the purchase price, not providing all the necessary documents and having a secondary mortgage on a home. In some cases, mortgage lenders have been overwhelmed with requests for short sales and haven’t been able to keep up with the case load.
  • Not all real estate professionals are familiar with the short-sale process. To protect yourself and improve your chances for completing a deal, find a real estate agent and attorney who understand and have completed short-sale transactions.
  • No matter how great of a bargain a home appears to be, do not make an offer until you do a public records search. This will allow you to see who holds the title to a home, whether there is a second mortgage or whether a foreclosure notice has been filed.

You certainly can find a great deal on a home through a short sale. But make sure you are fully committed to the process and have the time to wait for a deal to close.

 

 

 

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Getting Rid of Mortgage Insurance

Many people want to know what the best way to “get rid” of mortgage insurance — either Private Mortgage Insurance (often referred to as PMI) or FHA Mortgage Insurance (acts just like PMI, but payments are made to HUD, not a private mortgage insurance company).

If you want to avoid PMI altogether, you must put 20% down when you purchase the property. In the recent past, many times people would get a 2nd mortgage for that 20%, but many lenders have done away with “piggyback” loans — so more people are now buying homes and paying the PMI because they were not putting 20% down.

If you only put 5% down and are now wondering “at what point am I able to get rid of PMI” the answer is that when you reach a point where you think you have 20% equity in your property, you should contact your mortgage servicer. They will be able to tell you what their requirements are for “getting rid of PMI” and will usually send you a package of instructions that involve getting an appraisal and completing some forms.

Because the process is different between lenders, you need to speak with your current mortgage servicer to be sure. There is also a chance that they will drop the PMI automatically, but I rarely see that happen.

When dropping PMI, the factors that your lender will consider are the current value of your home and if you’ve made your mortgage payments on time. Be sure not to spend the money on ordering an appraisal to determine your property value until you have spoken with your lender about the process.

If you have an FHA loan — two things must happen in order to cancel mortgage insurance — the UFMIP account must be depleted completely (this takes 60 months from when you took out your loan) and you must have paid down the principal to 78% of your original loan balance. FHA monthly mortgage insurance does not take in to account any property appreciation that may have occured.

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