Choices...
Age, Value, Rate, it's what you qualify with:
Different than with an old fashioned conventional mortgage where income (no income, no loan) and credit score (lower credit means higher interest rate) go to determine what you qualify for, the FHA HECM is different. You can not be turned down because of lack of income. Nor can you be charged a higher interest rate because of poor credit, and good or excelent credit has no bearing on your rate as well. These are set by HUD and the FHA - not by the banks!
Age: Mininum age to qualify is 62 but this is one thing at least that older is better! The older the homeowner, and if there is more than one on title HUD uses the youngest age, the more you qualify for.
Rule of thumb: The older you are the more you qualify for.
Value: HUD uses the appraised value or the FHA Lending Limit (temporarily at $625,000.00), which ever is lower. For example, a home valued at $700,000.00 will have a FHA HECM value of $625,000.00 - the new base limit as part of the FHA Moderinzation Bill included in the Housing and Economic Recovery Act of 2008 singed in to law 7/30/2008. A home valued below this limit will use the appraised value of the home.
Rule of thumb: The higher your home value the more you qualify for, up to the FHA Lending Limit.
Rate: There are actually two interest rates used in the FHA HECM. First, the one most homeowners are familiar with is that rate that will be used to calculate the interest on the loan ballance. This is called the "Initial Interest Rate". The second rate is called the "Expected Interest Rate" and is used one time and one time only within the FHA HECM and that is to calculate the amount the homeowner qualifies for.
Rule of thumb: The lower the Expected Rate the more you qualify for.
* note: the expected rate will be the same as the initial rate on the fixed version of the FHA HECM, typically the initial rate is lower than the expected rate on the variable version of the program.
Loan Options:
FHA Variable Rate Home Equity Conversion Mortgage
The most popular FHA Reverse Mortgage Plan is the Variable Rate program. This option gives the homeowners the wides range of options - funds available can be taken out in one lump sum, the homeowner can received monthly payments for life in the home, keep the funds available in the FHA Line of Credit option and simply take out what they want, when they want (the FHA actually guarantees a rate of growth on the line of credit, even if the value of the home should go down the amount in the line of credit will continue to grow) or, any combination of these payment options. The homeowner can take some money out at close, leave the rest in the line of credit and... the homeowner can change their payment option at any point.
Different than with convential "adjustable rate" mortgages there is no deceptive "low introductory rate", this rate simply floats with the index, the same way banks lend money to other banks. It comes with built in protection and locks and while the rate can go up, it can can also go down (which is exactly what it has done for the past few years).
FHA Fixed Rate Home Equity Conversion Mortgage
Since the FHA introduced it's Reverse Mortgage in 1989 every Government Reverse Mortgage uses a variable interest rate, that is until June, 2007, when the FHA gave approval allowing Bank of NY to offer the first Fixed Rate HECM. And while the had been an answer for those homeowner's looking for the security of knowing what their rate will be this has not been the choice for all. One caviat to the Fixed rate version is that ALL funds available must be taken out at close. And while that may be a perfect fit for some, not every homeowner needs, or wants, all of the funds they have available from their home out at close. Currently, because the "expected rate" on the Fixed program is lower than with the Variable, homeowners are qualifing for more money with the fixed... but it is important to realize that this program isn't just about the money... it's goal is for safety and security of the homeowner. If you are speaking with someone about a Reverse Mortgage and they are steering you to the Fixed... well, get a second opinion - what may be best for the bank may not be the best for you. Make sure your options are fully explained.
FHA HECM for Purchase
One of the fasted growing purchase finance tools in America today is the recently approved FHA HECM for Purchase. This new tool now allows senior homebuyers an option - no longer do you have to pay cash for your next home, you have a finanace option that has no income requirement and no credit score requirement. For both home buyers and Real Estate professionals alike the FHA HECM for Purchase now means, at least for those fortunate to be age 62 or older the opportunity to not have to spend off of their cash on a new home... and never have to make another mortgage payment! And remember, for those who are looking into "down sizing"... that in no way means down "costing"... in fact, many find that their new smaller home costs even more than what they sold their old much larger home for.
Call Ted Butler Today! Toll Free at (877) 563-4241.