Reverse Mortgages are a way for senior Texans to receive a loan against their home that does not have to be paid back until the home is no longer used as his or her primary residence. Basically, the equity in the senior’s home is being converted into cash until he or she moves, sells the home or becomes deceased.
The home must be a single-family home or a one-to four unit home where the borrower actually lives. HUD-approved condominium or manufactured homes meeting FHA guidelines may also be eligible.
Who is eligible for a Reverse Mortgage?
Reverse mortgages are for individuals that are 62 years old or older and own a home outright or have a low loan balance and do not have any liens against the home.
Note that the borrower is still responsible for property taxes, property insurance and general upkeep of the home. Failure to do so could result in foreclosure.
The younger the borrower is, the less money they are eligible to receive since a life expectancy factor is considered in the loan payment formula.
If you are a senior that relies on public assistance programs, it is recommended you review the possible impact a reverse mortgage payout may have on these benefits first.
How does a Reverse Mortgage work?
If eligible, the borrower with have different payment options to choose from:
1) a lump sum cash payout
2) equal monthly payments for as long as borrower lives in home
3) equal monthly payments over a specified time period
Repayment is not due until borrower(s) moves, sells the home, or is deceased. At that time, the heirs of the borrower may pay the lien off to keep the property. Alternatively, the lender may foreclose on the property.
A reverse mortgage, like other loans, does accrue interest charges that are due once the first payment is made to the borrower. Often the rate is an Adjustable Rate Mortgage (ARM) with interest compounded monthly.
Note that reverse mortgages tend to have high closing costs and is not a good idea for those that plan to move in the next couple of years or if you are seeking quick money for a temporary emergency.
What other alternatives are there besides a Reverse Mortgage?
Reverse Mortgages tend to be complicated and expensive and may not be the best option for seniors. Other options to consider include:
1) Consider taking out a home equity loan
2) Lower expenses by moving to a smaller home or apartment
3) Seek a reduction or property tax credit on your home because of your senior status
FORECLOSED HOMES – ARE THEY REALLY A GOOD DEAL?
Foreclosed homes are homes in which the owner was unable to pay for and the Lender has taken back.
The legal steps to foreclose on a home vary from state to state thus the time for the actual eviction, foreclosure and going to auction (if necessary) varies also. When a finance company or a real estate agency purchases a property at auction and it is being re-sold, this is referred to as real estate owned (REO).
If you are looking to buy a foreclosed property to flip, be sure to check the home sales for that area. If homes are not selling, odds are you will not be able to sell very quickly after the makeover either.
Advantage of Purchasing a Foreclosed Home
The only advantage of purchasing a foreclosed home that I can think of is that the price is usually discounted.
Risks of Purchasing a Foreclosed Home
Risks of purchasing a foreclosed home include the condition of the home. If the previous owner was evicted, he/she may have taken their frustrations out on the house. Another risk is that many people are trying to buy foreclosed homes which lowers the probability of finding a good deal. You will definitely have to move very quickly on the better deals. The home may have liens on it (ex. unpaid taxes) which poses another risk. Inquire about any potential liens and find out who is responsible for paying them.
Things to Consider When Buying a Foreclosed Home
When buying a foreclosed home, be sure to have all of your financing in order .. especially if the property is already at auction and you plan to bid. Many auctions require payment in full within 24 hours. For REO homes, you can get regular financing.
Foreclosed homes are sold ‘as is’ which means that if you find any problems, repairs will not be made. For properties that are already at auction, you will not have an opportunity for a proper inspection beforehand to determine if there are any major problems and you could end up with a bad deal. For REO homes, you can schedule a proper inspection.
There is usually more paperwork when buying a foreclosed home because a government agency is involved.
In summary, buying a foreclosed home can be risky. If you decide you want to buy a foreclosed home in Central Texas and do not want to pay too much, be sure to contact your real estate agent to make sure the asking price is comparable to other homes in the area.
Did you realize that your credit score reflects your credit risk?
A credit score or sometimes referred to as FICO score is a number based on information from your credit file. It shows how likely you are to make timely payments on a loan. When your score is higher you are less risky, thus you pose less risk to lenders and are more likely to get a better rate.
Your credit report comes from 3 different credit bureaus: Experian, Equifax, TransUnion
The bureaus receive information from companies that have given you credit in the past. They consider payment history, length of your credit history, types of credit you have and amounts owed. Each of the credit bureaus creates a report with this information and derives a credit score which ranges from 300 to a perfect 850. If your score is above 700, you will usually get a relatively low rate. If your score is 760 or above, you will be charged the lowest rate.
Ways to Increase Your Score:
1. Pay your bills on time. Never be more than 30 days late.
2. Keep balances low on credit cards. Try not to charge more than 1/3 of the total line of credit.
3. Don’t open a lot of different credit cards you do not need. Your account age is an important factor in the credit score and new cards do not help. I prefer 2-3 credit cards with no department store cards.
4. Have credit cards but manage them responsibly. If you do not have credit cards, you may be more of a risk since you may not have credit history.
5. Do not close accounts to make it go away. Closed accounts still show up on your credit history and could factor into your score.
If you are considering purchasing a home in Central Texas within the next year, I recommend you contact a Mortgage Lender to pre-qualify. If your credit score is not satisfactory, the Lender can offer free advice on how to improve it.
Did you know that you can receive a FREE credit report annually? For a small fee, you can receive your credit score too: www.annualcreditreport.com
Southwest Austin is the fastest growing metro area according to Community Impact Newsletter. Not only is the population growth increasing but the business growth and employment is also increasing. The fastest growing ZIP codes metro-wide (from San Marcos to Georgetown) are 78748 and 78749.
From 2006 to 2010, Southwest Austin has seen a significant amount of new homes constructed in the area in relation to its size in the market. Although the growth has been mainly residential, “from 1997 to 2007, the area was faster growing in terms of employment and the number of business establishments according to data from the U.S. Census Bureau’s County Business Patterns/ZIP Code Business Patterns survey. Small businesses along the retail developments, such as Southpark Meadows, are mainly responsible for the growth in employment.
Southwest Austin is expected to continue growing but not at the same rate as previously seen because of the shortage of available land for residential development. Because Southwest Austin is an attractive area in which people want to live, we are likely to see more apartment development. Commercial growth is also expected to continue, resulting in more employers, retail business and jobs in Southwest Austin.
I have lived in Southwest Austin for a total of almost 20 years and have seen many changes. It is exciting to be a part of a rapidly growing area of this beautiful city!
Did you know that Goodwill’s mission is “to provide job-related services and opportunities for people with barriers to employment”? The dictionary description for the noun ‘goodwill’ is: friendly disposition; benevolence; kindness. Goodwill is synonymous with friendliness or favor. Goodwill is a kind act.
Goodwill was founded in Boston in 1902 by a Methodist minister, Rev. Edgar J. Helms. His idea was to collect used household items and clothing from the wealthier parts of town and hire and train the poor to make the repairs and either resell them or let the poor keep them. Dr. Helms’ philosophy was to create “a hand up, not a hand out”. Goodwill has expanded since then to over 180 cities in the United States and to over 30 foreign countries. Goodwill has become a multi-billion dollar non-profit organization.
The Goodwill stores maintain the same philosophy of helping disadvantaged people to gain meaningful employment and become independent; however, each store is able to respond to the needs of the particular community where the store is located.
Goodwill Industries of Central Texas is a private non-profit organization that was established in Austin in 1958 with the mission of providing job-related services to people with barriers to employment. Goodwill works with several other human services agencies to provide the best support system for people with disabilities and those with disadvantaged conditions that are seeking employment. More than 450 people in the Central Texas area are able to benefit from the Goodwill program each day.
If you would like to share in Dr. Helms’ philosophy of “a hand up, not a hand out” and to show your ‘kindness’, be sure to donate any unwanted household items or clothing to a local Goodwill store.