Reverse Mortgages: FHA Reverse Mortgages.. MIP (Mortgage Insurance Pr...

Reverse Mortgages: FHA Reverse Mortgages.. MIP (Mortgage Insurance Pr...: I am currently working with a man that is in the process of refinancing with an FHA Reverse Mortgage (HECM). We were going through the discl...

FHA Reverse Mortgages.. MIP (Mortgage Insurance Premium)

I am currently working with a man that is in the process of refinancing with an FHA Reverse Mortgage (HECM). We were going through the disclosures and he was appalled at the MIP funding fee of 2% of the appraised value of the home. He was equally appalled at the yearly MIP of 1.25%. I empathized with him and explained to him that all FHA loans came with MIP. Here are some things to think about regarding MIP.

First of all it is insurance. FHA Reverse Mortgages (HECM) are non-recourse loans which means the lender can never go after the borrower for a deficiency judgement. The MIP covers any deficiencies. So although the MIP is expensive it does serve a purpose with an FHA Reverse Mortgage (HECM). It provides you and your heirs with protection against passing along debt when  you die.

Here is another thing I explained to him. And this may be controversial when it comes to an FHA Reverse Mortgage (HECM), but in my opinion it is a non-emotional fact. The MIP and all other fees: Title, Escrow and Appraisal have absolutely no effect on your daily life when obtaining an FHA Reverse Mortgage (HECM loan). Here is what I mean...You are using your equity to pay for the MIP both up front and yearly along with all the other fees. You will get a lump sum at closing or have access to a line of credit that has already accounted for the MIP deduction and other upfront fees on an FHA Reverse Mortgage (HECM). Since you are not making any payments and your interest is silently accruing every year it has no effect on your daily life. It is purely an emotional hurdle that we all must overcome.

I asked my client a question. Do you think your home will appreciate over the next 10 years? He said yes. Do you think it will appreciate more than the fees you are paying at the close of escow? Yes. Finally, do you think since we are at or near the bottom of the market that the chances are your appreciation will outpace the amount of interest you will accrue on a yearly basis? His answer was probably. Does any of what we are talking about have an effect on your personal financial situation negatively? NO.

I also explained to him that the FHA Reverse Mortgage (HECM) had a saver option. In this option he does not have to pay upfront MIP, however he will get much less money. I explained to him that if you chose the saver then it could have a direct impact on him financially because even though he would be saving $10,000, in this particular case, he would get almost $60,000 less cash at closing. This will have a direct effect on his financial situation because that is actual money that he will NOT be getting at close. Now the real question for someone looking at an FHA reverse mortgageg (HECM) is the Saver worth it. Only the client can answer that question. It is dependent on the financial needs of each particular client.

A light came on for him and he appreciated the input. He wants as much money as possible at closing for his particular needs. He chose the no points rate and highest amount of cash at close and he will gladly finance the upfront MIP.

If you would like an education on the FHA Reverse Mortgage (HECM) or an analysis. Please visit my website: http://www.thefactsaboutfhareversemortgages.com/ or contact me from the information below.


Noah Burford
noahb4@gmail.com
949-278-9244 direct phone number.

FHA Reverse Mortgage Counseling...Required, helpful and protective for Seniors!

The FHA Reverse mortgage is starting to become more self-evident. We are seeing more celebrities endorsing the FHA reverse mortgage for different companies.  The baby boomers are getting to the age where they are eligible for a reverse mortgage. Let's face some facts that are real. People take advantage of Senior Citizens. They are a target for a lot of con artists. I recently met with a senior center and I was encouraged to hear some of the advice they were offering to their attendees. One in particular was no "Free lunch invitations". We have always heard there is no such thing as a free lunch. There have been some studies and they concluded that quite a bit of the con artists pitching scams offer a free lunch.

The FHA Reverse mortgage requires a hud sponsored counseling session before you can get a case number and start the process on a new reverse mortgage. This is a great form of protection against unscrupulous brokers and lenders. It is an educational session done with a Hud approved organization that has no financial ties to the loan or its closing.

It is a great way to gather information about the FHA reverse mortgage and to get educated before you begin the process.

As always, if you have any questions or would like to get an analysis of your situation or your parents situation, please contact me via phone or email.

Sincerely,

www.truthaboutFHAreversemortgages.com

Noah Burford
949-278-9244 cell phone
noahb4@gmail.com

Reverse Mortgages: Reverse Mortgage terminology.. What the heck is a ...

Reverse Mortgages: Reverse Mortgage terminology.. What the heck is a ...: Reverse Mortgages have a lot of terms associated with them. For all of us in the business they are used in normal conversations and sometime...

Reverse Mortgage terminology.. What the heck is a HECM?

Reverse Mortgages have a lot of terms associated with them. For all of us in the business they are used in normal conversations and sometimes we forget that it may sound like we are speaking a foreign language to someone not familiar with Reverse Mortgages. My goal today is to give you a quick education on the different terms associated with a Reverse Mortgage. Here we go!

www.truthaboutFHAreversemortgages.com

HECM..This is a common term and it stands for Home Equity Conversion Mortgage. It is very good definition of what you are actually doing with a Reverse Mortgage. The client is converting equity in their home into cash or credit.

FHA..I know this may seem like an easy one. But, I am surprised at how many people are not familiar with  this term.  FHA = Federal Housing Administration. An FHA loan  is a "mortgage issued by federally qualified lenders and insured by the FHA."

Non-recourse.. You often here the term "non-recourse" loan when you hear about a reverse mortgage. Here is the definition: "A type of loan that is secured by collateral, which is usually property. If the borrower defaults, the issuer can seize the collateral, but cannot seek out the borrower for any further compensation, even if the collateral does not cover the full value of the defaulted amount. This is one instance where the borrower does not have personal liability for the loan." This is great for heirs!

Libor Loan..London Interbank Offered Rate. You often see this term on a comparison of options for a reverse mortgage. It is associated with an Adjustable rate option for a reverse mortgage. Adjustable rate Reverse Mortgage is a choice for people that do not want all of their equity now, but would rather have access to it via a line of credit.

LOC.. This is a term often used with an adjustable reverse mortgage. It stands for Line Of Credit. It is like having a credit card on your home. You can access the money when you need it.


These are some of the common terms associated with a reverse mortgage. I want to end with an explanation of a Reverse Mortgage in laymen's terms. It is simply a loan offered by lenders for people over the age of 62. If the borrower is eligible and qualified then it is attached to a primary residence. The loan does accrue interest every year at a fixed or an adjustable rate. There are no payments made by the borrower. There is no credit or income requirements. It is an FHA insured loan and is non-recourse loan.

If you have any questions or you would like to inquire about a Reverse Mortgage. Please email me or call me direct.

Sincerely,

www.truthaboutFHAreversemortgages.com

Noah S. Burford
noahb4@gmail.com 949-278-9244

Children and The FHA Reverse Mortgage for their parents Part 2...

As promised I am going to take a more in depth look at the FHA Reverse Mortgage through the eyes of the heirs. So many children or heirs get a bit nervous or flat out hostile when they found out their parents are looking into an FHA Reverse Mortgage loan. Their feelings are based in fear due to not understanding how the product works.

First let's look at the reality of most situations of people that are in need of an FHA Reverse Mortgage. Like most people their 401k's have been decimated over the last 6 years and most of their net worth is due to the equity they have in their home. They may have a small mortgage on their home or no mortgage at all, but they are getting by in SSI and whatever retirement they have in place. The fact is their overall portfolio of assets is heavily weighted in real estate. They are not diversified.

An FHA Reverse Mortgage can be used to help diversify their overall portfolio. Let's take a look at an example. Here are the parameters we will use:

Age = 65
Value of home = $450,000
Mortgage balance = $150, 000
Mortgage Payment = $800 Principal and Interest payment

This for this person they would qualify for an FHA Reverse Mortgage Loan amount = $271,748. Interest accrued at 6% over 10 years is @$214,000. I used a higher rate to account for Mortgage Insurance and to be conservative.  You can visit www.thefactsaboutFHAreversemortgage.com and use our Reverse Mortgage Calculator to find out what loan amount you or your parents will qualify for on an FHA reverse mortgage.

So what are the end results of this transaction:

1. Borrower gets @$121,000 to put into the bank to use for living expenses etc... or give to their financial planner. This is equity that has been locked in or converted to cash! Most good financial planners can do great things with money right now. Their are lots of good and safe investment vehicles in this market.

2. Borrower no longer has an $800 mortgage payment. Let's put this in perspective. Over 10 years they save $96,000 in payments!! This is a fact that people seem to forget about the FHA Reverse Mortgage. That is actual money in the pocket of the borrower.

3. Borrower now has a new loan for the amount of $271,748 that is accruing interest at 4.99% a year.

4. $96,000 + $121,000 (equity converted to cash) = $217,000.  Who knows what mom and dad did with the money. But here is my point. Although interest is accruing... the money saved and received from the transaction vs interest accrued is almost a wash. (See above the interest accrued at 6% compounded is @$214,000)



Here are the questions that heirs really want to know when you look at this equation. What is left for them when mom and dad pass away? Most children only see a $271,748 loan accruing interest every year and "eating away at their inheritance". But they do not factor in what happens to the equity that was converted into cash or how this will help their parents live the rest of their days.

I do not have a crystal ball and every situation is different. But here is what I do know.

1. Mom and Dad can never leave children with debt from an FHA reverse mortgage. It is a non-recourse loan. So if Mom and Dad use the money to go on cruises, travel the world and enjoy their last days and the housing market drops like an anchor.. Heirs are covered.
2. If Mom and Dad invest the money wisely and the real estate market appreciates at 4% a year over the next 10 years (which is what the experts say) the FHA Reverse mortgage can actually increase the heirs inheritance.

An FHA Reverse Mortgage is not for everyone. It should be used as a tool to fill a need or solve a problem for people that need it. It can also be used by more savvy individuals to actually increase net worth. Each situation is different. If you are considering an FHA Reverse mortgage please contact me and I can educate you on this product and see if it will be a benefit to your particular situation.

Noah S. Burford
www.thefactsaboutFHAreversemortgages.com
949-278-9244
noahb4@gmail.com

Children and the FHA Reverse Mortgage for their parents...Part 1

I heard an interesting statistic at a lead conference in Las Vegas a few years ago about "who" is doing most of the on-line searching for FHA Reverse Mortgages. According to this particular study, 85% of the leads generated were from the children of the Senior Citizens. This makes sense if you break it down. My mom and dad are slow to conform to the internet age, although they try to incorporate it in their lives, it is difficult. I deal with Senior Citizens on a daily basis and quite a few of them still do not have an email and they never will.

This presents an interesting dynamic for The FHA Reverse Mortgage and marketing this tool to Senior Citizens. I cannot tell you how many people have quit offering FHA reverse mortgages because they were so tired of the kids getting in the middle of the transaction and stopping the process. You could  see the frustration in their eyes as they would tell stories about having a deal almost done that would help a particular client and then at the last minute a child would come in and stop the transaction because they did not want to "lose their inheritance" or they thought "this was a scam to take money from old people". I have dealt with this as well and I have found the best thing to do is educate the children.

Let us start with the number one reason children do not want their parents to do an FHA Reverse Mortgage: They do not want to lose their inheritance. This is an understandable driving force especially for children that may have done a poor job saving, do not have a job and  are going through hard times financially. There are a myriad of reasons why they get very nervous about their inheritance.

I am not going to spend much time on the entitlement issues that come along with a child and inheritance. I come from the background that any inheritance I get is pure icing on the cake. My parents needs and well being comes first in my book. It is their money, not mine and they have worked hard to be able to use it as they see fit in the last half of their lives.

I have good news for all you children out there worried about losing your inheritance! This product can actually help preserve it and make it grow to a larger amount! Yes, it is true. Although the FHA reverse mortgage is a loan and it does accrue interest every year it is still attached to an asset that has quite a bit of value (The house of your parents). The reason I know this to be true is because for an FHA Reverse mortgage to even make sense there needs to be equity in the home. Also the lending limits are very conservative. Let me explain via an example:

Lets take 63 year old person with a home worth $300,000. The loan amount (or lending limit) for an FHA Reverse mortgage is 56.9% of the value.. aka 56.9% LTV (loan to value). At a 56.9%LTV the lending limit = $170,700.

Value = $300,000
Lending Limit or Loan amount = $170,700

This leaves quite a bit of equity reserves in the house and we are at or near the bottom of the real estate market. It is a good time to diversify! And the chances that the equity reserves will actually increase over your parents lifetime are good, thus your inheritance is safe. BUT, do not forget about the money they received from the FHA Reverse Mortgage.. that is still in play as part of the estate. If your parents got a check for $150,000 and they invested it or put it in the bank etc.. THAT IS STILL PART OF THE ESTATE along with the equity left in the home.

I am going to break this down much more in depth in my next blog, Part 2. But here is the bottom line; the money your parents get from the FHA reverse mortgage does not disappear. It typically goes into an bank account or an investment. You are simply locking in equity today and moving it somewhere else.

Have a great Labor Day Weekend. More to come tomorrow. Be Safe.

Sincerely,

Noah Burford
noahb4@gmail.com

Attention Real Estate Agents there is an under served market of equity listings waiting for you!

I saw a statistic the other day that completed astounded me... Since the FHA Reverse Mortgage Purchase LOAN was introduced in 2008 there not been a lot of these loans closed. This made sense to me after the experience I have had over the last 90 days talking to over 100 Real Estate Agents in Southern California. I hear a lot of agents complaining that they are not busy, they are trying to do short sales or seminars to get short sales etc...I ask them all this question: If I could show you a tool that will help you tap into an under served market that will generate Equity Listings and well qualified buyers with large down payments, would you be interested? They all are interested! But that is where it ends.

Here are some facts:
1. A fast growing segment of our population is the baby boomers.
2. By the year 2020 the people living in their homes over the age of 65 will increase by 20%.
3. As people age and retire they look to downsize and move closer to family and friends.
4. It is difficult to get a conventional loan as a retired person on a fixed income.
5. Most senior citizens do not want to use all of their equity from the sale of their current home to buy a house cash. For a lot of them their house represents their biggest part of their retirement funds or savings.

In summary, there is a large segment of our population that wants to move but cannot due to a number of different reasons ranging from:

1. Inability to get a loan due to more stringent lending standards.
2. Lack of desire to buy a home cash because they need the money to help with living expenses etc..


How can we help this market of people? The answer is easy and it is an answer that can bring lots of units and closings to Real Estate Agents! Educate people over the age of 62 on how to use an FHA Reverse Mortgage for Purchase loan to buy their next home. This loan solves most of the problems that are keeping them from moving!

1. No income verification or requirements.
2. No credit requirements (they can have bad credit and get this loan).
3. No mortgage payments ever.
4. Easy qualifications.

These loans are based on 3 things:

1. Age (you must be 62 years or older)
2. Value of the house you are going to purchase and the zip code for the home.
3. Down payment

Here is an example:

A person the age of 65 wants to buy a home for $400,000 in Yorba Linda, Ca. The FHA will give them an FHA Reverse Mortgage Loan in the amount of $240,898. They will have to come up with a down payment of $159,102 plus fees.

The same scenario for a person that is 72 years old is:

FHA Reverse Mortgage Loan amount = $256,898
Down Payment = $143,102

They can buy a home and never have to worry about mortgage payments for as long as they live in that home. They can also sell it and do it again.

If you are a Real Estate agent I encourage you to contact me so I can educate you on this tool!! There is a market of equity listings and well-qualified buyers waiting for you!

Noah S. Burford
noahb4@gmail.com
949-278-9244
NMLS#360982

The FHA Reverse Mortgage is more than a loan for some people...it is a financial tool!

I have been in the financial arena for close to 20 years now. I have learned quite a bit and I have been around some  very smart financial advisers and money managers. In this current economy I think it is safe to say that if you have cash there are some investment opportunities. My area of expertise is in Real Estate and I can assure you there are deals to be had in buying homes.

If you are looking to move and sell your home today, you have to consider that you are selling at or near a bottom. Most people focus on this fact and they forget the other side of that equation. You are also buying at or near the bottom. You buy and sell with the same brush stroke if you will. In a perfect world it should even out. But what if you could just buy in this market and wait to sell when the values start to rise again? That would be a savvy move!

I met with  woman last night that is 72 years old. She is currently living in a home that has a lot of equity in it. I listened to her situation and decided that she did not need to do an FHA reverse mortgage to solve any problems or meet any financial needs. She has a good retirement. She has a low payment on her current mortgage. As I was starting to wrap up she mentioned to me that she wanted to move closer to her children in another county.  We started talking about the FHA reverse mortgage purchase loan and she mentioned to me that she would love to buy the house that is closer to her kids now (because she can get a great deal on it) but she was not ready to move and sell her current home.

I told her I had a solution! The house she wants to buy is @$250,000. With an FHA Reverse Mortgage on her current home she would receive proceeds close to $300,000. SO, here is what the family is now considering. Getting the FHA reverse mortgage on her primary residence, using the proceeds to buy the home closer to her children and renting it out for a couple of years. And oh by the way.. the rental market in this area is superb. She will earn a little over 10% cash on cash return on the rental home. And she is borrowing the money to buy this home at 5%. Good move!

How a good move can turn into a great move! In two years when she is ready to move from her current home  hopefully the market will be in an upswing. During this time she has made a good return on her money.  So both of her homes will be worth more 2 years from now then they are today. If all goes according to plan. She sells her primary residence. Pockets the equity and moves closer to her kids.

Get to know the FHA Reverse mortgage! It is a great product the government has for people over the age of 62.

Sincerely,

Noah Burford
949-278-9244 cell
noahb4@gmail.com