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postheadericon Details Anybody Can Use About Reverse Home loans

Given that Nelson Haynes of Deering Savings & Loan originated the world’s very first reverse mortgage loan in 1961 to a Portland, Maine widow reverse mortgages have grown steadily in popularity. Thinking of only reverse home loans insured by FHA, the number of origination increased more than a thousand fold from 1990 to 2008. For quite a few unfortunate older persons, taking out a reverse mortgage is not optional. Rather, it is something they need to do just to have sufficient money to pay for such things as rent, gasoline, meals and prescription drugs. While the reasons for taking out such a loan can vary, the fact remains home equity is a nest egg that is often overlooked. portland mortgage broker

So how does it all work with this type of a loan? A Dwelling Equity Conversion Mortgage, or HECM, is the technical name for a reverse mortgage. With an HECM a borrower of at least 62 years of age can achieve an income by tapping into his or her house equity. As long as the borrower resides in the household as a primary residence no repayment of the loan will be demanded. Without question, most reverse home loans fall under the purview of Fannie Mae, Freddie Mac and the Federal Housing Administration. Outside of these, you may find them offered by some state and local governments. You’ll find that the guidelines for eligibility vary a bit from one particular reverse mortgage program to another. That said, all reverse home loans are basically the same in terms of how they work.

It is helpful to use the example of a conventional mortgage loan, also known as a “forward mortgage”, as a reference for understanding how it’s reverse mortgage opposite. In this context, the term “forward” refers for the direction of the payment stream. A forward payment stream exists when the borrower makes payments for the lender–i.e., makes payments in a forward direction. As the borrower makes payments over time the amount owed gets smaller. With a reverse mortgage, this payment stream is reversed. Now the lender makes payments to your borrower and over time the amount owed on the property gets larger. The borrower retains title and ownership so long as the household continues to be a primary residence.

Certain eligibility prerequisites need to be met in order to be eligible for the loan. A borrower must be at least 62 year of age or older, with no maximum age. Although credit is generally not an issue when being qualified, a reverse mortgage applicant who is in default on any debt owed to a federal agency needs to satisfy the debt, bring the loan balance current or have a documented payment agreement in place with the federal agency. Most programs are similar in this regard. You must own your household free and clear. If you don’t then the balance owed must be small enough that it can be paid out of the loan proceeds. If a borrower hasn’t already received reverse mortgage counseling services at the time of application then the lender is required to direct the borrower to do so at an independent source. The house that is to serve as collateral must me a principle, single-family residence. This is defined as a 1-4 unit property. Property types classified as manufactured, condominium or PUD will not necessarily exclude you from eligibility. If you are good in terms of these prerequisites then you’re most likely ready to apply for an HECM.

The size of the proposed loan is constrained by variables such as the age of the youngest borrower, the amount of estimated closing costs, how much the house appraises for and any amount still owed on the residence. There are four options for receiving payments from the lender:

1. Lump sum – borrower receives all of the cash at once.

2. Cash advance – Once a month you’ll receive a payment.

3. Line of credit – This option allows for the greatest flexibility with respect to how much and when you get paid.

4. Combination – It’s possible to use a combination of all of the above options.