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Wells Fargo Signs Home Affordable Second-Lien Modification Program...Reverse mortgage pros and cons
First off, a reverse mortgage is a loan that is only offered to elderly homeowners. This type of loan will use the borrowers existing equity as collateral in order to take out a new loan. “That is why it is called a “reverse mortgage.”
The FHA guidelines state that in order for a borrower to qualify for a reverse mortgage, the homeowner must be at least sixty-two years old. The amount allowed for the borrower to take out on this loan, is not allowed to exceed sixty-five percent of the properties value.
Many borrowers wonder what type of homes qualify for this assistance. The truth is almost any type of home can qualify. But before mobile homes can qualify they must meet certain criteria according to FHA’s guidelines.
Below you you find a list of some coomon advantages and disadvantages of a reverse mortgage loan.
Advantages that come along with a reverse mortgage:
- Very easy to qualify, there will be no income or credit limit required.
- If the homeowner defaults on their mortgage their lender won’t take the home, as they would in a home equity loan.
- There is no requirements as to what you are allowed to spend the loan on. This loan can be spent anyway the borrower pleases.
- You are guaranteed a home and can remain in your property as long as you choose.
Reverse mortgage disadvantages:
- This type of loan is due in full either when the homeowner vacates the property, or the homeowner passes away. If the borrower is planning on moving in the near future, it would not be wise to take out this type of loan.
- A may be required to pay higher closing costs.
- You will be required to have a decent amount of equity in the home. Usually lenders require 40-50% equity these days.
- With this type of loan, there will usually be no monthly payment required, there fore the interest rate and fees may be higher when the loan is due in full.
So if you are in need of a loan and are at least 62 years old, you may want to look into a reverse mortgage.
About Evan Bedard
Evan Bedard has worked with various law firms since 2007 as a top Countrywide Home Loan modification processor. Evan has been instrumental in helping the various law firms and homeowners save over 800 homes. He is also a mortgage guide in the LoanSafe forum and is helping homeowners daily.