If you have looked into a reverse mortgage online for your home, more than likely you have come across several offers that seem too good to be true. There are many ways that you can end up getting involved in a reverse mortgage scam if you are not careful.
Contact a mortgage lender and make sure that they are a member of the National Reverse Mortgage Lenders Association, if you are eligible, you can set an appointment with a government-appointed counselor that will make sure you are making the right choice for your needs.
The United States Department of Housing and Urban Development, also known as HUD, offers many programs and grants to help homeowners who are struggling with their mortgage payments due to having a low income. Their website if full of helpful tips and resources that can assist a wide range of issues many homeowners faces day to day. The HUD site is a federal website, so you can be rest assured that your information will be kept safe and that your case will be handled with respect and professionalism.
There are several important facts that everyone should know when considering a reverse mortgage. Whether you are receiving assistance from a HUD program, or choose to take a different route, if you have a keen sense of knowledge on reverse mortgages, it will be less likely that you end up in a reverse mortgage scam. Here is some helpful information that may be beneficial to you when taking out a reverse mortgage.
Know the facts about a Reverse Mortgage
A reverse mortgage may sound complicated, but it is simply a type of mortgage that allows you to convert some of your home’s equity into cash. The home mortgage payments you have made over the past few years is turned into equity, and converted into a cash payment for you. Unlike typical home equity loans, a reverse mortgage loan does not require any repayment until 1) the borrowers no longer use the home as their primary residence or 2) They fail to make a mortgage payment.
How to Qualify for FHA’s HECM Reverse Mortgage
To meet the FHA’s HECM eligibility requirements, you must be a homeowner that is 62 years of age or older and live in the home that you are requesting the reverse mortgage for. You must also own your own home with no amount owed, or have a mortgage with a low balance that can be paid off at closing.
Will I still have an estate to leave to my Heirs if I use a FHA loan?
When you sell your home, either you or your estate will pay for the cash that was received from the reverse mortgage, including any interest. Any remaining equity will go to you or your heirs. Many people think that this is a sign of a scam; however your HUD representative will make sure you know all the information up front before you make a final decision.
Is there a Difference between a Reverse Mortgage and a Bank Home Equity Loan?
Yes. With a typical second mortgage or home equity loan from a bank, you will have to have a specific income in order to qualify as well as meet any credit requirements and make monthly payments on the loan. A reverse mortgage will pay you and is available no matter what your current income situation may be. The amount you are allowed to borrow depends on your age, appraised value of your home, the interest rate at the time the loan is taken out and the sale’s price.
With a HECM you do not make any monthly principal or interest payments. The lender will instead pay you based on the payment plan you selected. However you are still required to pay any real estate taxes, utilities and homeowner’s insurance if applicable.
How much can I get out of my home?
The amount of money you are allowed to borrow is based on several factors. The age of the youngest borrower and the current interest rate are major factors. You are typically able to borrow more if you go with the HECM standard option. If your home has an exceptional amount of value and the interest rate is very low at the time of your reverse mortgage, this will also greatly affect the amount you can receive.
It is very important that homeowners know as much as they can concerning reverse mortgages before they take one out on their home. It can be easy for an uninformed individual to get wrapped up in a reverse mortgage scam that will end up costing them a substantial amount of money in the long run. Do your research beforehand and weigh your options. If you meet the requirements for a FHA loan, then you should get in contact with the HUD representatives in your area to begin the process. This is the best, scam free option for many older homeowners who wish to take out a reverse mortgage.
