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Are reverse mortgages a good idea? And can they be used to purchase property as well as refinance?

The answer is yes, a HECM reverse mortgages can be a great idea for the right borrower. And the HECM can be used to purchase and or refinance property.

The HECM or Home Equity Conversion Mortgage is FHA’s reverse mortgage program. The program enables borrowers to withdraw some of the equity in their home. The HECM can also be used to purchase a property.

In order to be eligible for the HECM, FHA requires that borrowers be 62 years of age or older. The home being financed must also be their primary residence. In most cases there is little no credit or income required. And the home must be a single family home or a 2-4 unit home with one unit occupied by the borrower.

And despite all the misconceptions of what happens to the home and or its equity when the home is sold or is no longer being used, all proceeds beyond the principal amount owed belong to the borrower, their spouse or estate. This means any remaining equity can be transferred to their heirs. No debt is passed along to the estate or heirs even if the home is valued less the owing balance of the loan.

If you have questions or would like to see if you qualify for the HECM please contact me directly at YourFinancingGuy.com

Are Jumbo Loans available for borrowers who have less than 20% down?

The answer is yes, there most certainly are!

There are actually a number of different options available for borrowers who have as little as just 10-15% down. These options can vary depending on the how much the borrower is looking to finance.

For borrowers looking to finance $1MM or less, a down payment of just 10% is required. For the borrowers looking to finance over $1MM but no more than $2MM, a 15% down payment will be required. And for those borrowers looking to finance over $2MM and up to $10MM, a minimum down payment of 20% will be required.

Aside from the amount financed and the down payment there are a number of other factors that can dictate which options will be available. These factors are based primarily on the individual borrowers needs as well as their qualifications. For instance, in most cases a good to excellent credit score will be required. But there occasions were a lower credit score may be accepted. That is just as long as there are compensating factors. Income and assets also play a major roll in deciding which terms work best. Just remember that the more income and assets one has the more term options and opportunities they will have.

The terms offered with Jumbo are similar to standard conventional loans. There are adjustable (ARM) as well as long term fixed rate options. There are interest only payments. In some cases there are ever 40-year amortization. One of the biggest benefits to Jumbo financing is mortgage insurance is rarely required. And piggyback lines of credit are also available to help capture lower rates and payments while avoiding the high cost of mortgage insurance.

As great as it would be not everyone can afford or is willing to place a full 20% down. For those borrowers it is wise to understand all your options. Please contact me for further information.

Low down payment? There are far better ways than FHA…

When buying a new home with a low 3-10% down payment there are far better ways than FHA.

The common misconception among consumers and real estate professionals is that when purchasing a new home with a low down payment FHA is the only option. But that just isn’t the case. There is no doubt that FHA has become immensely popular in recent years with its lose underwriting guidelines. But its also managed to overshadow the facts regarding conventional lendings (Fannie Mae & Freddie Mac) low down payment requirements.

You see with Fannie Mae borrowers are able to purchase property with as little as 3% down. And with Freddie Mac the requirement is just 5% down. That means that Fannie Mae actually requires 0.5% lower down payment on their purchases than FHA does. Interesting, right?

Okay, okay so a .05% is great and all but are there any other benefits to going conventionally?

Well the biggest benefit for most new home buyers is that you no longer need to worry about whether the property you’re looking at is FHA approved. Most properties like condominiums, town homes or planned urban communities (PUD’s) have homeowners associations. Most homeowners associations are not FHA approved. That means that as a FHA buyer your choices can be very limiting. And in most cases you may not be able to purchase the home you want. Not with conventional financing.

It also means that you no longer have to pay outrageous mortgage insurance rates. FHA’s typical annual mortgage insurance rate is 1.25%. And that is for the life of the loan. With conventional financing the MI rates are much lower. And in some cases its even non-existent through lender paid MI programs. That difference can equate to an annual savings of hundreds even thousands.

And lets not forget all the red tape as well as the rigorous requirements that come along with obtaining an FHA property inspection. These have been known to cause a myriad of delays and out of pocket expenses. This is not the case with conventional financing.

The bottom line is that FHA financing can be great for those who truly need more flexible guidelines. But if you have the option you may want to think twice about whether you want that FHA loan.

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