11 Reverse Mortgage Myths Debunked!

Just like many other loans, there are myths many people believe about Reverse Mortgage that are false. Below, some of the major myths are debunked.

  1. The owner signs away the home and is owned by the bank upon passing.
    • NOT TRUE— the owners remain on title and have full authority to sell the house. If the house is sold, the loan must be paid off (just as is required with any home equity loan).
  2. The owner’s heirs do not have equity when the owner dies.
    • NOT TRUE– the highest loan amount a borrower can receive is 75% of the appraised value (must be 90 years old and older). No borrower can receive 100% of the equity. The amount of equity available to the borrower depends on the age of the youngest borrower.
  3. Anyone can get a Reverse Mortgage
    • NOT TRUE– at least one borrower must be 62 years or older. In addition, all borrowers must pass a financial/credit assessment.
  4. Any type of home can get a Reverse Mortgage.
    • NOT TRUE– Reverse Mortgages are available on FHA APPROVED single family residences, condominiums, town homes, and planned unit development dwellings. All must meet FHA guidelines.
  5. The money received from a Reverse Mortgage with affect the Social Security or Medicare benefits a borrower receives.
    • NOT TRUE– the funds received from a Reverse Mortgage are considered the borrower’s home equity. The only way a borrower’s benefits MIGHT be affected is IF the borrower gets a lump sum distribution and deposit it into an account. This will then be counted as part of the borrower’s assets.
  6. The money received from a Reverse Mortgage is taxable or will affect the borrower’s taxes.
    • NOT TRUE– the funds received from a Reverse Mortgage are considered the borrower’s home equity.
  7. This loan has high closing costs and fees.
    • NOT TRUE– typically closing costs for the Nashville area are between 2-3% of the appraised value for either a Reverse Mortgage, Purchase or Refinance that is in 1st lien position.
  8. The owners must own the home “free and clear” in order to get a Reverse Mortgage.
    • NOT TRUE– 1st or 2nd mortgages may be paid off with this loan. Note: the amount of the loan depends on the youngest borrower– as long as the borrower’s qualify for enough money to pay off existing liens, this may be done.
  9. The borrower must have a credit score above 620 to get a Reverse Mortgage.
    • NOT TRUE– credit score doesn’t not affect this loan. The credit assessment is simply an evaluation of your payment history/credit activity for the past 24 months.
  10. The borrower’s debt to income ratio cannot exceed 40% to qualify for a Reverse Mortgage.
    • NOT TRUE– the debt to income ration is not a factor of this loan. The financial assessment that is completed calculates if the borrowers have the excess funds to pay all other debts, annual property taxes, annual homeowners insurance and have enough residual income to live on.
  11. If the value of the property goes down the loan is due and payable.
    • NOT TRUE– once the Reverse Mortgage is closed and funded the loan is cast. The value of the property does not affect the loan after closing. In addition, this is a NON-Recourse loan. If the value goes down and the owner wants to sell, dies or goes into an assisted living, the proceeds of the loan after closing costs and realtor fees will satisfy the debt. If the heirs want to retain the property, they only have pay 95% of the current appraised value to satisfy the debt.

To see additional information regarding Reverse Mortgage, please visit my youtube channel: https://www.youtube.com/user/klgrodi/videos.

Also, you can visit https://www.consumer.ftc.gov/articles/0192-reverse-mortgages for additional information.

If there is a question you may have that I don’t answer, feel free to email me at kgrodi@klgmcm.com or call be at 615-970-2216. I’d be happy to sit down and discuss any questions or concerns.

Frequently Asked Question #6

This is the sixth question in our FAQ blog series on Reverse Mortgages. The following question is important for those seeking a Reverse Mortgage.

FAQ #6

“Will a Reverse Mortgage affect the borrower’s social security check they receive?”

Not one bit! The money a borrower receives from a Reverse Mortgage is non-taxable. It’s the equity in the home that is being accessed. A Reverse Mortgage has nothing to do with a borrower’s taxes, social security, or medicare.

To see additional information regarding Reverse Mortgage, please visit my youtube channel: https://www.youtube.com/user/klgrodi/videos. All of the questions in this series on “Frequently Asked Questions regarding Reverse Mortgage” are answered in those videos.

Also, you can visit https://www.consumer.ftc.gov/articles/0192-reverse-mortgages for additional information.

If there is a question you may have that I don’t answer, feel free to email me at kgrodi@klgmcm.com or call be at 615-970-2216. I’d be happy to sit down and discuss any questions or concerns.

Frequently Asked Question #5

This is the fifth question in our FAQ blog series on Reverse Mortgages. The following question is important for those seeking a Reverse Mortgage.

FAQ #5

“What happens to the equity in the home with a Reverse Mortgage?”

When both borrowers pass away, the equity from the home is passed on to heirs. A Reverse Mortgage is just like any loan that needs to be paid off so once the heirs pay off the loan, they get to keep the remaining balance.

To see additional information regarding Reverse Mortgage, please visit my youtube channel: https://www.youtube.com/user/klgrodi/videos. All of the questions in this series on “Frequently Asked Questions regarding Reverse Mortgage” are answered in those videos.

Also, you can visit https://www.consumer.ftc.gov/articles/0192-reverse-mortgages for additional information.

If there is a question you may have that I don’t answer, feel free to email me at kgrodi@klgmcm.com or call be at 615-970-2216. I’d be happy to sit down and discuss any questions or concerns.

Frequently Asked Question #4

This is the fourth question in our FAQ blog series on Reverse Mortgages. The following question is important for those seeking a Reverse Mortgage.

FAQ #4

“Do you still own your home with a Reverse Mortgage?”

Yes! The borrower is still in legal title to the home and there is also no prepayment on the loan.

The money the borrower receives from the Reverse Mortgage is coming out of the equity in the home.

There are a few different ways the money can be paid out from the Reverse Mortgage:

  1. The borrower can request a specified amount each month ($2000/month for example) to help with prescription drugs, doctor bills, housing expenses, ect.
  2. The borrower can  request a lump sum (grandkids college, vacation, ect.)

To see additional information regarding Reverse Mortgage, please visit my youtube channel: https://www.youtube.com/user/klgrodi/videos. All of the questions in this series on “Frequently Asked Questions regarding Reverse Mortgage” are answered in those videos.

Also, you can visit https://www.consumer.ftc.gov/articles/0192-reverse-mortgages for additional information.

If there is a question you may have that I don’t answer, feel free to email me at kgrodi@klgmcm.com or call be at 615-970-2216. I’d be happy to sit down and discuss any questions or concerns.

Frequently Asked Question #3

This is the third question in our FAQ blog series on Reverse Mortgages. The following question is important for those seeking a Reverse Mortgage and concerned about their credit score.

FAQ #3

“Do you need perfect credit to get a Reverse Mortgage?”

The rules have tightened down in the past few years. They don’t necessarily care about your credit score or debt-to-income ratio but what they do look at is what the borrowers have done financially in the past 2 years. They perform a financial assessment if you will. They look at any late payments, foreclosures, judgments, etc.

Upon review, two things can happen if there has been any late payments, foreclosures, judgments, etc. in the past 2 years:

  1. The borrower might receive half of what you could have received which is known as a “partial assessment”.
  2. The borrower might have to hold-off on a Reverse Mortgage until enough time has passed.

The borrower also needs enough income to be able to pay taxes and insurance while having enough to maintain the house as well.

To see additional information regarding Reverse Mortgage, please visit my youtube channel: https://www.youtube.com/user/klgrodi/videos. All of the questions in this series on “Frequently Asked Questions regarding Reverse Mortgage” are answered in those videos.

Also, you can visit https://www.consumer.ftc.gov/articles/0192-reverse-mortgages for additional information.

If there is a question you may have that I don’t answer, feel free to email me at kgrodi@klgmcm.com or call be at 615-970-2216. I’d be happy to sit down and discuss any questions or concerns.

Frequently Asked Question #2

This is the second question in our FAQ blog series on Reverse Mortgages. The following question is important for those seeking a Reverse Mortgage to ask and make sure they understand all of the stipulations to what they are signing up for.

FAQ #2

“When is the Reverse Mortgage loan due?”

Great question! So glad you asked.

After closing, you’ll have no monthly payment whatsoever.

The loan is due if 3 things happen:

  1. The house in question is no longer the primary residence
  2. Both borrower’s have passed away (the heirs have 6 months to sell the home— extensions are given)
  3. Both borrower’s move in to a nursing home and can no longer live in the house (must sell home)

A Reverse Mortgage is much like a home equity loan. If both borrower’s pass away, the title company pays off the loan and any remaining proceeds go to the heirs.

If there is a question you may have that I don’t answer, feel free to email me at kgrodi@klgmcm.com or call be at 615-970-2216. I’d be happy to sit down and discuss any questions or concerns.

 

Frequently Asked Question #1

After being in the mortgage industry 25+ years, and more recently focusing on helping senior citizens with understanding the benefits to Reverse Mortgage, I have found there are some of the same questions that people tend to have. Over the next few weeks, I will be answering some of the most frequently asked questions regarding Reverse Mortgage.

Frequently Asked Question #1: How much money can I borrow with a Reverse Mortgage?

  • How much money you can borrow depends on the age of the youngest borrower. At 62 years (which is the minimum age to qualify for a Reverse Mortgage), you can borrow 52.4% of the appraised value of your home. At 90 years, you can borrow 75% of the appraised value of your home. The most you can borrow is 75%.

For more information, see link below:

https://www.consumer.ftc.gov/articles/0192-reverse-mortgages

If there is a question you may have that I don’t answer, feel free to email me at kgrodi@klgmcm.com or call be at 615-970-2216. I’d be happy to sit down and discuss any questions or concerns.

The TRUMP EFFECT on the Mortgage Industry

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The Trump Effect: Mortgage Industry

Now that Trump has been sworn in and has assumed his position as Commander-in-Chief, what affect does his presidency have on the mortgage industry? Read on to find out the Trump Effect on the mortgage industry:

  • Interest Rates
    • Since November 8, 2016 mortgage interest rates are up .625% on FHA/VA and .75% on Conventional loans. (Note: The federal open market committee (FOMC),  raised interest rates .25% on December 14, 2016. The first meeting of 2017, FOMC voted unanimously to maintain the interest rate. Three additional rate hikes are anticipated in 2017. Fed funds in a factor of the overall mortgage interest rate)
  • The Stock Market
    • The Dow Jones Industrial average rose 5.4% after Trump’s election, the best weekly performance in 5 years.
  • Taxes
    • Income tax brackets will be move from 7 to 3. The top tax rate is going down from 39.6% to 25%. There is talk of eliminating the alternate minimum tax.
  • Construction of New Homes
    • Construction of single-family residences has increased. “Single-family starts, on the other hand, rose 1.9 percent month-over-month to 823,000 units.” (Realtor Magazine)

Lastly, Donald Trump has mentioned repealing the Dodd-Frank act which would, in my opinion, reduce mortgage regulations and enable lenders to get approved for more loans. If you have any questions regarding the above information or want more information regarding the mortgage industry and where it’s headed, feel free to give me a call at 615-970-2216 or send me an email at kgrodi@klgmcm.com. I will do my best to answer any and all of your questions and if I don’t have the answer, I will find out from someone who does.

Bankrate. “6 Ways President Donald Trump May Affect Your Wallet.” NASDAQ.com. Nasdaq, 09 Nov. 2016. Web. 10 Jan. 2017.

“Housing Starts Cool Off in January.” Realtor Magazine. N.p., 27 Feb. 2017. Web. 27 Feb. 2017.

Ben Protess and Julie Hirschfeld Davis. “Trump Moves to Roll Back Obama-Era Financial Regulations.” The New York Times. The New York Times, 03 Feb. 2017. Web. 27 Feb. 2017.

Top 10 Reasons Loans Get Denied

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Knowledge is power. You have the ability to greatly improve your chances for success once you know what you should and shouldn’t do to obtain home financing

10 Reasons Loans Get Denied 

  1. The borrower’s credit score or items on the report. Keep in mind most home financing programs required the borrower to have at least 2 open accounts with over 12 months history that have not been late in the past 12 months! Remember it’s not only the “bad” stuff on the report the borrower needs to focus on. The “good” stuff has to be there as well. A loan could be denied if: the score drops below the minimum needed for the program during the processing of the loan.  Some of the top 10 reasons loans get denied, and your credit scores drop are: recent late payments on any account, new purchases are added, charges over 50% of available credit are made on revolving accounts, co- signing or becoming an authorized signer on an account, new public records that are derogatory are added, borrower disputes an item, new tax liens, bankruptcy, foreclosures, repossessions, collections, charge offs and short sales.

  2. Omitted debts (alimony, child support, employment loans) on applications or no explanation for non-income large deposits.

  3. Poor residence stability or poor rent payment history.  Any late payments on rent in past 24 months.

  4. Too much layering of risk— payment shock, limit to reserves, debt to income ratios aren’t satisfactory. Can’t prove future occupancy. Time on current job is too short and poor job stability overall will contribute to the top 10 reasons a denial will result.

  5. Employment – Borrower has a job change, works less hours, lower income, loss of job, becomes self employed or becomes involved in current litigation.

  6. Appraisal – The value does not support the loan and negotiations between the Buyer and Seller fail. There are not at least 3 acceptable/recent comparable sales for this property. No explanation on any adjustments on comparable sales in the appraisal.  Highest and best use of the property is not residential.

  7. Property fails— The Seller refuses to complete repairs needed. There are Liens against the property that aren’t in the clear. No resolution on HOA or COA current legal issues.

  8. Interest rates increase which causes the payment to exceed what the borrower can afford.

  9. Loan program/guidelines change which causes the borrower to not qualify.

  10. Borrower no longer has funds needed to close the loan (down payment, closing costs and prepaid expenses). Borrowers result in divorce or one of the borrowers die.

For pre-approval, A competent/professional mortgage loan originator should be chosen once a borrower has made a decision to purchase a home and needs home financing. This takes all the guess work out of home financing and should dramatically improve the chances of gaining final loan approval.

Kathey Grodi is a retired CPA who has over 24 years of experience in originating mortgage loans!  For pre-approval, call Kathey today at 615-970-2216 or 417-337-0377.  She has over 24 years of experience and would love to provide you with financing!  Contact Kathey Grodi today!

Green or Environment Friendly Living

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FREE TIPS TO LIVING AN ENVIRONMENT FRIENDLY LIFE— 

1) Unplug all electronics and battery charges when not in use. Put TV, Stereo and computers on strips to make them easy to turn off.

2) Use programmable thermostats.
3) Set hot water heater to 120 degrees.

4) Clean dryer vents and lint filters. Keep both unobstructed.

5) Turn off lights and ceiling fans every time you leave a room.

6) Use both vent fans when bathing or showing especially in summer.

7) Clean or replace furnace filters at least every three months.

8) Keep supply and return grills to HVAC clean and unobstructed.

9) In winter, keep the drapes/ shades open on the south facing windows during the day and close them at night.

10) In summer, keep the drapes/shades closed on the south facing windows during the day.

11) Close fireplace and wood stove dampers when not in use.

CHEAP TIPS—

1) Install Compact Fluorescent light bulbs (CFB) in place of incandescent bulbs.

2) Add insulation to hot water pipes, around the hot water tank and beneath any electric hot water heaters if they set on concrete.

3) Inspect and change as needed the sacrificial anode rod in your hot water tank.

4) Seal all possible air leaks in your home.

5) Install low-flow shower heads, faucet aerators and low volume or dual flush toilets.

6) Plant evergreen trees where they will block the prevailing winter winds.

7) Add solar screens or window tinting to east and west windows and south-facing unshaded

windows.

8) Plant deciduous trees where they will shade east, west and south windows in summer.

9) Service your HVAC system twice annually.

10) Add motion sensors to outdoor lighting.

11) Replace bathroom vent fan switches & timers.

BEST INVESTMENTS—

1) Test duct system for leakage. Verify your return grills are large enough. Code requires a minimum 1.5 sq. ft. or grill per ton of air conditioning, and more is even better.

2) Add foil-faced duct wrap to any ducts exposed to outdoor temperatures in attics or crawl spaces.

3) Increase your attic insulation to achieve a minimum R-38, blown cellulose is recommended because it has a higher- value and it reduces air leakage.

4) Look for the ENERGY STAR label when buying anything that uses energy.

5) When replacing your heating and cooling equipment, purchase units that are more efficient than the minimum 80% gas furnaces and 13 SEER heat pumps and air conditioners. 13-17 SEER is best.

THINGS YOU SHOULDN’T DO—

1) Don’t plug your old refrigerator in unconditioned areas such as garages.
2) Don’t close off rooms that have supply grills in them.
3) Don’t seal or block combustion air vents in closets with a gas furnace or gas water heater.

ITEMS YOU CAN INCLUDE IF YOU ARE BUILDING OR REMODELING A HOME—

Low flow/dual flush toilets, LED lighting, aerator for faucets, tankless hot water heater, SIPS—Structural Insulated Panels, skylights, duct efficiency, spray foam insulation, 17 SEER HVAC unit, Low VOC paint, cement siding, Energy Star appliances, sustainable products, recycled products for flooring and or countertops, good site orientation, properly sized vent fans in all baths and laundry rooms, Humidistats, programmable thermostats.40 year shingles, solar panels, mastic sealing, radiant barrier decking, double pane windows, property seal home, 90+ furnace ratings, dust free drywall mud, salvage old/used items.

HEALTH INFORMATION ON GREEN HOMES—

1)  Recycle household items & electronic equipment to reduce harmful mercury and other toxic waster in landfills.
2)  Buy household products that are eco-friendly or made from recycled materials.
3)  Save water by landscaping wisely.
4)  Improve Indoor air quality by using bath and laundry vent fans.
5)  Use low VOC (Volatile organic compound) paint when possible.
6)  Don’t use products in home that contain Formaldehyde.