Yin Yang of Reverse Mortgage Closing Costs
I wish there were such a thing as a perfect mortgage product. People always ask me, "what is the down side to getting a reverse mortgage? It looks too good to be true".
There is no doubt, and I let my folks know this upfront, reverse mortgage closing costs, for FHA insured mortgages, are higher than typical forward mortgages.
FHA insured mortgage upfront costs are high for 3 reasons: First, the lender performs an appraisal on the home and charges costs on the value of that appraisal, not the money the borrower is qualified to receive.
The second is FHA charges 2% of the value of the home up to $417,000. And the last is reverse mortgage lenders charge an origination fee .5% to 1% higher than typical forward mortgages.
One doesn't need to have a degree in advanced calculus to quickly figure out that closing costs are fairly expensive.
As far as the origination fee goes, one could make the case that it is not more expensive than a forward mortgage. The difference is forward mortgages build the fee into the rate.
Much of the differences in comparing closing costs between forward and reverse mortgages comes down to the FHA upfront mortgage insurance. For a home valued at $417,000 just the MIP is over $8,000. It's no doubt a bundle, but without it, most of the same people griping about costs couldn't use this tool.
Example: for a 70 year old borrower with a $200,000 home. Today, a reverse mortgage lender will allow this borrower to pull out in excess of $130,000.
Non-FHA products are not really in existence anymore. However, Fannie Mae had one prior to dumping it in the fall of '08. Here is one of the reasons why it's gone. The same customer would have been eligible to receive less than one hundred thousand dollars.
The reason the FHA product is so strong is that crummy insurance. The insurance guards the lenders against loss, thus allowing them to lend more money.
The insurance covers the lender in the event that one day more is owed on the home than the home is worth. This is the lender's biggest fear.
Expensive, horrible, bitter FHA insurance hedges the lender's risk, which makes much more money available to borrowers. But in the end it allows so many seniors to solve stressful financial issues.
There is no doubt, and I let my folks know this upfront, reverse mortgage closing costs, for FHA insured mortgages, are higher than typical forward mortgages.
FHA insured mortgage upfront costs are high for 3 reasons: First, the lender performs an appraisal on the home and charges costs on the value of that appraisal, not the money the borrower is qualified to receive.
The second is FHA charges 2% of the value of the home up to $417,000. And the last is reverse mortgage lenders charge an origination fee .5% to 1% higher than typical forward mortgages.
One doesn't need to have a degree in advanced calculus to quickly figure out that closing costs are fairly expensive.
As far as the origination fee goes, one could make the case that it is not more expensive than a forward mortgage. The difference is forward mortgages build the fee into the rate.
Much of the differences in comparing closing costs between forward and reverse mortgages comes down to the FHA upfront mortgage insurance. For a home valued at $417,000 just the MIP is over $8,000. It's no doubt a bundle, but without it, most of the same people griping about costs couldn't use this tool.
Example: for a 70 year old borrower with a $200,000 home. Today, a reverse mortgage lender will allow this borrower to pull out in excess of $130,000.
Non-FHA products are not really in existence anymore. However, Fannie Mae had one prior to dumping it in the fall of '08. Here is one of the reasons why it's gone. The same customer would have been eligible to receive less than one hundred thousand dollars.
The reason the FHA product is so strong is that crummy insurance. The insurance guards the lenders against loss, thus allowing them to lend more money.
The insurance covers the lender in the event that one day more is owed on the home than the home is worth. This is the lender's biggest fear.
Expensive, horrible, bitter FHA insurance hedges the lender's risk, which makes much more money available to borrowers. But in the end it allows so many seniors to solve stressful financial issues.
About the Author:
2 tremendous resources to help prospective Texas reverse mortgage customers gage whether the Texas reverse mortgage may be the right choice click on either of the 2 links in this section.
posted by Debt Consolidation Loan at
10:22 PM
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home