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Here’s The Scoop On The New Reverse Mortgage Rules

New reverse mortgage rules are in full effect and will change the way that you have to qualify for a reverse mortgage. But the good news is that most people will be just fine.

As of April 27th, 2015, borrowers will have to undergo a form of financial assessment before they can get approved for a reverse mortgage. These newer reverse mortgage rules have been put into place to help reduce the amount of evictions or foreclosures by assuring that only qualified borrowers are approved. They were initially set to take effect in early March but were rolled out in April instead.

You may qualify for a reverse mortgage if you are 62 or older and pass the financial assessment. In order to qualify, you have to retain a significant amount of equity in your home, and demonstrate that you can pay the homeowner’s insurance and property taxes as well as manage basic upkeep. A reverse mortgage is NOT based upon your income or credit rating, and does not have to be repaid until you have died.

The new reverse mortgage rules have been created to help protect borrowers. Now the Home Equity Conversion Mortgage (HECM) program requires that you are able to demonstrate the ability to make good on property taxes and state mandated homeowner insurance policies before you can get approved for the loan. While your credit score and income won’t impact the loan side of the deal, it will be a factor that’s taken into consideration when assessing your ability to keep up on taxes and insurance.

If your assessment finds that you can’t afford to pay taxes or insurance on the loan, you will have the option of having those funds withheld from your lump payment, line of credit or monthly payout options. The goal of these new rules is to help protect homeowners as well as lenders. Mortgages are only feasible when the market is healthy. With newer rules in place, both sides win because there are fewer defaults, which makes the loans more attractive to lenders. What’s more, lenders are bound by newer rules that ban certain loan types as well as aggressive marketing tactics.

A common consideration for older Americans seeking a secondary nest egg, a reverse mortgage may be the solution that you’ve been seeking. Be sure you fully assess your financial position first. Reach out to your financial advisor as well so you can make a well informed decision.

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2 comments

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  2. The problem is the up front lender fee, often $5,000-$7,000 are an obstical and simply can not be justified. No reason for those fees to be any more than any other FHA loan.

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