Three weeks ago I met with Marcia and who was at her wit’s end. A few years back she found out her daughter and two grandchildren were in an abusive situation. Having a heart of gold, she offered to have them move in with her until the the situation was resolved.

It’s been difficult for her daughter to find solid, stable work in this tough economy so, once again, Marcia was there financially to support them. She had to take on a part time job herself to try and make ends meet. With the rising cost of food, gas, utilities and the cost of living — she was just going deeper and deeper in debt. It was spiraling out of control and Marcia was panicking.

Marcia, in desperation, decided to look into a reverse mortgage. The numbers showed that Marcia could pay off her current mortgage, obtain $5,000.00 to pay off some bills and have another $43,000.00 available in a line of credit for emergencies down the road.

Her concern was could she qualify? When she learned that she did not need good credit to qualify, it was the answer to her prayers.

She completed her counseling, went to application, the appraisal was performed and she closed her reverse mortgage in less than three weeks. Marcia was so relieved to have this behind her. She kept saying “you don’t know what a burden this is off my shoulder.” I can now focus on helping my daughter get her life established and get back to my retirement…”you just don’t know how relieved I am.”

I was so delighted to help Marcia get her finances and life back in order that it really made me feel happy too — that I was a part of getting this family back on track … priceless!

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One of the biggest factors or components in a reverse mortgage that you don’t find in a regular or forward mortgage is the upfront Mortgage Insurance premium (MIP). Currently this fee is 2% of the loan amount. This cost is because a reverse mortgage is a non-recourse loan. What that means in layman’s terms is the fact that the borrower will never be responsible for owing more on the mortgage than what the home is worth at the time of sale. That is a good thing! You will only find this MIP charge on a government (FHA) or HUD loan. Other loans such as a jumbo product still contains the non-recourse coverage, but the cost to give you that insurance is rolled into the interest rate. While the closing costs are lower on a jumbo product, it will limit you on the amount you can borrower and the cost of interest onto your loan balance would be higher monthly than a government loan.

Currently another 2% will go towards the Origination Fee. This is how your loan officer and mortgage company will get paid to process, fund and close your loan package. Part of the FHA Modernization Bill about to be presented to Congress is to have the origination fee be capped at 1.5%.

About another 1% will be attributed to regular fees charged in any mortgage process. Appraisal, Credit Report, Flood Certification, Title Insurance, Courier Fees, Recording Fees, etc.

On your closing statement or HUD fee sheet, you may see other charges such as Home Owners Insurance, Property Taxes and pay offs to any current mortgage holders on the property. This will be specific to your transaction and may not be charged for all transactions.

For further information or questions please contact me at 720.641.3482 or bartonkaren@comcast.net