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Reverse Mortgage Myths
You may have heard or read about the potential downsides
of reverse mortgage programs. Much of the information
circulated online and by inexperienced mortgage loan
officers is simply inaccurate. Below is a list of popular
myths and a brief explanation as to the truth behind
the following statements:
You must have excellent credit to qualify for a reverse mortgage.
Completely untrue. Reverse mortgage underwriting guidelines do not take into
account a borrower's income or debt.
You can become upside down on your loan and end up owning more than your
home is worth.
Borrowers and their heirs will not be required to ever pay back more than the
value of the home.
The bank will become the owner of the property when they close.
Just as is the case with a traditional loan, the borrower retains ownership
of the property and the mortgage is simply a lien against the property.
You must own your home outright in order to qualify for a reverse mortgage.
While owning your home free and clear may allow you to obtain the greater benefit,
it is certainly possible to obtain a reverse
mortgage if you have a current mortgage balance. The balance must be paid
off with the proceeds from the reverse mortgage.
Reverse mortgages are extremely costly.
The vast majority of reverse mortgages are FHA
HECMs, which are heavily regulated by HUD and the
Federal Housing Administration. Closing costs are typically
only about 1% higher than their traditional mortgage
counterparts. Still, reverse mortgages are not for everyone
and it is important to speak with a reverse mortgage
professional to better understand the benefits and costs
associated with reverse mortgages.
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