With a reverse mortgage loan, a borrower will always retain ownership or title of a home. At any point, the lender never will own the property even after the final surviving spouse vacates the property permanently.
The quantity of funds a borrower is qualified for will depend on the individual’s age (or the age of the youngest spouse within the cast of couples), house value, upfront costs, and interest rates. The older a person is, the more proceeds they might receive.
There’s a limitation on the quantity of money a borrower may access within the first twelve months after a close. If the borrower is qualified for a $100,000 loan, for instance, no more than 60% or $60,000 may be accessed.
Lenders have to perform a “financial assessment” of all reverse mortgage borrowers to make sure the individual is able to afford to reside in the home and pay future homeowner’s insurance and property taxes, over the loan’s life. Lenders will look at all the borrower’s streams of income, which include Social Security, investments, and pensions. Also, reverse mortgage borrowers have to offer bank account statements and tax refunds to assist document income and costs. All credit trouble (that is, late payments) have to be explained. A lender will determine if the explanation is eligible as an “extenuating circumstance” in obtaining the reverse mortgage approved.
A lender will subtract what a borrower pays for insurance and taxes, debt obligations and additional living costs from a borrower’s assets and income. All resulting “residual income” includes the quantity of funds left over every month. The amount is compared with a government threshold figure–based on family size and region–,which determines if the borrower has enough month-to-month residual income in order to pass the evaluation.
If a borrower passes the financial evaluation, they may proceed with getting the loan. However, if a lender decides that a borrower doesn’t have an adequate amount of cash flow, a borrower’s loan application may be declined, or all–or the majority–of the available proceeds of the loan is placed into a Life Expectancy Set-Aside and specifically used to pay homeowner’s insurance and property taxes for as long as these funds last.
To learn more about our reverse mortgage loan program, contact Longbridge Financial at 855-523-4326.
