Entries Tagged 'Mortgage' ↓

Reverse Mortgage Myths and Misconceptions

Despite the growth of reverse mortgages, many senior homeowners are still wary of these loans. A lot of seniors often ask for advice from their relatives and friends, but the problem is that most of these people also lack knowledge on the subject. Retirees can benefit greatly from reverse mortgages. But in order for them to enjoy the benefits offered by these loans, the reverse mortgage myths and misconceptions they are harboring should be dispelled first.

Safety is primary concern of most retirees considering reverse mortgages. They think that when they get a reverse mortgage, the bank will assume ownership of their homes, which is not true. What these homeowners should realize is that the home is in and remains in their name only. They can continue to own their homes and retain title throughout the life of their loan. Reverse mortgages, being like all other mortgages, require a lien to be placed on the property to ensure lenders they will be repaid the amount owed, which includes the principal, interest and closing costs. Additionally, most reverse mortgages are insured by the Federal Housing Administration, which offers maximum protection through the insurance fee paid on all FHA reverse mortgages. Other reverse mortgages are insured by the private lenders that offer them.

Another common misconception is that compared to other mortgages, reverse mortgages are more costly. But the truth is reverse mortgages could actually be lower in cost compared to other types of mortgages. This is because conventional mortgages can charge more than the 2 percent origination fee permitted on all reverse mortgages. Also, closing costs for reverse mortgages average only about 1 percent more than if a regular FHA mortgage were obtained on the same property.

Some homeowners also have this misconception that they cannot qualify for a reverse mortgage if they have an existing mortgage, or other real estate secured debt. But even though they have an outstanding first mortgage or other home equity loan or tax lien, they are still eligible for a reverse mortgage. However, the existing debts must first be paid off by the loan proceeds.

Another mistaken belief homeowners may have concerns the requirements needed to obtain a reverse mortgage. There are no income or credit requirements for reverse mortgages as long as one surviving borrower continues to reside in the home. Borrowers with previously discharged bankruptcies are also qualified. Aside from meeting the age requirement of 62 or older, it is required that the borrower must own the home with no others on the title.

One other falsehood that needs to be corrected is the belief that a reverse mortgage is taxable and affects Social Security and Medicare. In reality, proceeds from reverse mortgages are tax-free simply because they are loans, and not income. Plus, rules governing Social Security, Medicare and FHA Reverse Mortgage have all been made to complement each other. However, in instances when borrowers exceed certain liquid asset amounts, Supplemental Security Income (SSI) and Medicaid may be affected.

With the different reverse mortgage myths and misconceptions now dispelled and cleared up, skeptical retirees can now feel comfortable getting a reverse mortgage and enjoy the benefits that come with it. By getting assistance from a reverse mortgage advisor, homeowners can go through the process easily and with confidence.

5 Mortgage Secrets Your Broker Won’t Tell You

Millions of American homeowners and investors each year go to mortgage lenders for help in financing or refinancing their homes. But what they do not know is that they are paying more than they have to.

Taking out a mortgage loan requires full comprehension of each feature that a mortgage plan offers. Before signing on the dotted line, you should make the necessary calculations and accurately compute the cost of each type of mortgage with respect to the life of the loan, plus the length of time it would take to pay off the mortgage, including the amount of monthly payments.

Here are 5 mortgage secrets that your mortgage lenders won’t tell you outright:

1. You don’t have to pay for private mortgage insurance (PMI).

Consumers who make downpayments below 20 percent of the purchase price are usually required to pay PMI, together with principal and interest payments. What most borrowers are not aware of is that they can avoid paying mortgage insurance by taking out two mortgages.

2. By closing at the start of a month, you increase your closing costs.

Mortgage interest payments are usually set in arrears to coincide with complete calendar months. This means that any time you have between your closing date and your first complete monthly due on a purchase mortgage is considered additional time. This further means that you are required to pay interest on those extra days up front at the closing table. By closing later, you may not be able to save money but you don’t have to pay higher closing costs up front.

3. You can negotiate broker fees.

Mortgage brokers buy mortgages at wholesale prices and then rack them up to retail prices. By law, these brokers should reveal their commissions in a Good Faith Estimate before consumers sign the documents. Consumers have a chance to negotiate their fees if they want to. A standard-sized mortgage loan can have a markup range of up to 1.5 percent. Those with jumbo loans can likely negotiate it down.

4. Low interest rates advertised are usually discount rates.

Mortgage lenders typically advertise mortgage loans with low interest rates. But what they don’t tell you is that these rates are only introductory, which are used to entice customers into applying for a mortgage loan from them. These rates are only applicable for a certain period. When the introductory period is through, the mortgage lender then adjusts the discount rates to the actual rates, which are higher than the introductory ones. Because of this, the monthly mortgage dues suddenly increase. Moreover, these mortgage loans may also have variable interest rates, meaning they are bound to increase some more.

5. “100% financing” and “5% Fixed Interest Rates” are not exactly what they seem to be.

A lot of mortgage lenders have the habit of using such baits as those above. But these are usually empty promises. Consumers can well stay away from these enticements. By reading the fine print on mortgage documents, borrowers will uncover outrageous lender charges, hidden fees and rates that don’t remain fixed at all. These should be enough to make people think about falling into the mortgage trap that’s set exquisitely for unassuming consumers.

Borrowers may also be interested to know that aside from the obvious charges, they are also required to pay for mortgage insurance, loan application fee, valuation fee, legal costs, stamp duty, disbursements, survey report, builder’s report, pest inspection report, strata inspection report, registration fees, switching fees and refinancing fees.

To be sure that you get the best loan you can, keep these little known points in mind and be sure to ask lots of questions If the lender skirts the answer, it probably a good idea to move onto someone else. By being informed, you will be more apt to choose the best deal for your situation.

Get the Best Mortgage by Working with a Mortgage Broker

It has been reported that two out of three Americans employ the services of a mortgage broker in purchasing a home. This is because you are much more likely to get the best possible mortgage for your needs with the assistance of a mortgage broker. Through the guidance of a mortgage broker, you have easy access to more options and are offered a wider range of loan products. Not to mention the ease of the process when someone else takes care of the details!

Mortgage brokers are a major factor in the mortgage market. Mortgage brokers shop around for the best loan and provide an analysis of the options to the borrower. They have the ability to help you discover loans that are most suitable for you and can even help arrange special deals.

The mortgage broker takes the loan application, does a financial and credit assessment, produces the necessary documents, and closes the loan. A lot of lenders work on a wholesale basis and will not even deal directly with any borrowers. It’s the mortgage broker who joins the lender and the borrower together.

There are two different types of mortgage brokers. One is the tied mortgage broker and the other is the independent mortgage broker. The tied mortgage broker does not charge consumers any upfront fee. If you decide to go for the loan he or she recommends, the mortgage lender tied with him pays him commission. They have access to different types of deals and lenders, but they offer consumers limited choices due to the connection they have with certain mortgage lenders. On the contrary, independent brokers can provide borrowers just about every deal and lender, with no duty to remain faithful to any particular lender. Although independent brokers can offer a full array of mortgage plans from different mortgage lenders, it is you who foots the bill.

You can smartly use a mortgage broker in a number of ways. First, you need to know the type of loan you want and make a note of the possible fees you will incur. Contact several mortgage brokers over the phone, brief them on what you require, and take note of their offers. For those who promise special deals, obtain a written oath that the terms and conditions offered are similar or superior to those the lender will offer borrowers direct. Contact phone brokers, too, and listen to what they have to offer. Before you commit to a broker’s offer, make sure that they are licensed, and see if they are a part of the Better Business Bureau, or a similar organization.

However, there are many states where mortgage brokers are considered an unlicensed profession. In this case, you should make certain that you have personal references before conducting your business with a mortgage broker.

You can get the best mortgage by working with a mortgage broker who knows the business and how to get deals from lenders. Since tied mortgage brokers can only provide you the best deal offered by the company to which they are associated with, doing business with independent brokers may seem a the right choice, that is if you’re ready to pay for their services.