When a person, aged 62 or higher, wants to use the equity in their home to eliminate current monthly mortgage payments, the FHA lender helping them will use a mortgage calculator to determine for what the senior qualifies. The fixed rate HECM reverse mortgage usually provides the borrower with the largest amount of money.
Causes
If the senior still owes more than for what they qualify, there is a shortfall. The calculator will determine the total amount which will be offered to the borrower. From that amount of money normal closing costs would have to be paid. So, on a $100k loan there would be approximately six percent taken up by the broker fee, appraisal, title costs and FHA fees. If the reverse mortgage pay-off is higher, the customer would have to use money on hand to pay the shortfall difference. They cannot borrow the money as that would most likely place another lien of the property which is not allowed by the FHA.
A new allowable loan for reverse mortgages is the purchase
The same calculations are used to determine the amount of money which would be available for the purchase of a new home.
Once again, closing costs have to be paid and they again are about six percent of the total loan. The lender will use an appraisal for the property to determine what the pay-off will be. Deducting the purchase price and the closing costs from the available money will more than likely result in a shortfall.
The borrower must use cash on hand to settle the shortfall. Again no outside lending on this transaction is allowed if it results in a lien being placed on the subject property.
Related posts: