The call came in February. On the phone was a 203k loan officer, one of the nation’s top renovation loan specialists. He said, “Laurie, see if you can do anything for this borrower. She’s retired and I can’t qualify her for anything close to what she needs.”
Driving to my first appointment with the borrower I passed block after block of beautifully restored Washington, D.C. homes – lovely, graceful row houses with wrought-iron garden gates, beautiful brickwork, and small but carefully landscaped yards.
Then I arrived at my destination.
A year earlier there had been a house fire that had partially destroyed much of the downstairs, and the homeowner lacked the means to restore the home. She tried repeatedly for a conventional, “forward” loan, but simply did not have the income to qualify under the new, stringent lending requirements. However, she also didn’t want to give up the home in which she and her late husband had raised their family.
After interviewing her for some basic facts, it was clear she met the requirements for FHA’s seniors’-only Reverse Mortgage, more formally known as the FHA HECM. I called a professional contractor who agreed to get paid after closing, and work began that same week.
The result has been astonishing. Mere weeks ago there stood charred stairs, fallen timbers, a gutted kitchen, and scorched flooring; now in their place stand meticulously restored railings, crown molding, wood floors, and new appliances. It is beautiful.
And most beautiful of all? No payments, for as long as the homeowner lives in the home.
This smells fishy. How can I live in a home and not make payments?
Answer: Not making payments is very different from saying the loan is never repaid. The loan is always repaid – it’s just that you don’t repay it. When you are finished with the home, the home itself repays what’s due.
But when is the loan repaid?
Answer: The loan is repaid when the last person on title moves, sells, or dies. In other words, the loan is repaid BY THE HOME once the senior no longer needs the home.
But what if the home has gone down in value and the proceeds from the sale can’t repay the loan?
Answer: The home repays what it can. Any shortfall is made up by the mandatory Mortgage Insurance Premium (MIP).
But where does the money come from to repay the loan?
Answer: The home is either sold, and the proceeds from the sale repay the loan, or the senior’s family secures new financing and buys the home.
But what if I want to leave the house to the kids?
Answer: You can still leave the house to the kids; it’s still your house. The kids have up to one year to: 1) line up their own financing, and start making their own payments, or 2) sell the house.
However, they would have had to do this anyway if you had a “forward” mortgage…AND, with a forward mortgage they would have had to take over your mortgage payments, starting month one after you were gone, or risk losing the house.
How long can I stay in my home?
Answer: As long as you want to. As long as you pay your property taxes, keep current on your homeowner’s insurance, and maintain the home, you never have to move. You can, however, move whenever you wish.
How old do I need to be?
Answer: The youngest person on title must be 62 at the time of settlement.
If this program is so great, why don’t more people know about it?
Answer: Despite a lot of money spent on financial education for seniors, there are still far too many people who are very bold in speaking very forcefully about topics they know very little about. And that is very unfortunate.
If you or someone you know is 62 or older and looking to do home repairs, renovations, or upgrades, call me. The FHA HECM may very well make this dream a reality.
Laurie
Laurie MacNaughton [NMLS# 506562]
Reverse Mortgage Consultant
Middleburg Mortgage, a Division of Middleburg Bank
20937 Ashburn Road, Ste 115
Ashburn, Virginia 20147
703-477-1183 Direct
LMacNaughton@MiddleburgBank.com
www.MiddleburgMortgage.com/LaurieM
For More Information, Visit my Resource Blog (click here)
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