Reverse mortgages have become very popular in recent years. They were first introduced to the financial sector back in 1961, although it took some time for them to gain traction. A growing number of seniors have discovered the numerous benefits of using reverse mortgages.
In 2019, over 31,000 reverse mortgages were issued in the United States. That number is likely to climb in the future, especially if we encounter more economic uncertainty.
Despite the growing interest in reverse mortgages, a lot of homeowners don’t understand how to make the most of them. One thing that seniors need to know is how to get the best possible rates on the reverse mortgage. This can help them secure more capital and leave their heirs with a greater inheritance after they pass. If they have to give up or sell their property, it also means they don’t have to pay nearly as much back to cover the balance of the loan.
You should use a reverse mortgage calculator like this one https://reverse.mortgage/calculator to make sure you get the best rate. If you worry that you might not get a great deal, then you need to follow the right steps to get a better one.
What steps can you take to get the best possible deal on your reverse mortgage?
Are you planning on taking out a reverse mortgage in the near future? You should take the following steps to get the best possible rates.
Wait until you and your spouse qualify for your pension and Social Security
The standards for qualifying for a reverse mortgage are a lot more lenient than they are for traditional mortgages. The bank recognizes that there is less risk, since you already own the property.
However, there is still some risk that the bank needs to consider. They have to worry that you might fall behind on your insurance and property taxes. Although these expenditures are a lot lower than a mortgage would be, they still need to be budgeted for. The lender might not be comfortable giving you a reverse mortgage if they feel you don’t have a dependable income to cover them. They might also decide to give you the loan, but charge higher rates.
The best way to avoid this is by showing that you have a stable income. You should consider waiting until you have qualified for Social Security and your pension. The lender will be a lot more comfortable issuing you a reverse mortgage at that time.
Make sure that your credit is in good standing
As with most other aspects of the actual process, your credit score is not as important with getting a reverse mortgage as it is with getting a traditional mortgage. However, it is still something that lenders will take into consideration. They have to worry that you might not pay your insurance or property taxes if you have a history of delinquency on other debts. They also might be worried that you will need to sell the home unexpectedly to cover those debts, which could compromise your ability to pay back the reverse mortgage, especially if the property value drops.
You want to take steps to get your credit squared away if there any problems. Pay back any debts that you have outstanding before applying. If you can’t pay them all back, then at least try to make a dent in your high interest debts, such as credit card bills.
Consider using an LESA
Your financial lender might raise some concerns about your ability to pay your property expenses. Even if you have the money to cover future insurance and property tax bills, they might still raise these concerns. This complaint often arises when do you have issues on your credit report, but a number of other reasons could be behind their concern.
The good news is that there are some ways that you can mitigate these concerns. One option is to participate in a Life Expectancy Set Aside (LESA) program. Under this agreement, you will put enough money aside to cover your property insurance and taxes for the rest of your expected lifetime.
Take the application seriously
They should go without saying, but it is important to take your reverse mortgage application seriously. You need to review all of the requested information and make sure the necessary documents are provided. You want to do everything as timely as possible.
You can get good rates on your first mortgage if you follow the aforementioned steps
It is important to understand the actual process that lenders follow when issuing reverse mortgages. You need to understand what your bank is looking for when applying. If you follow the steps listed above, you are going to get better rates and make sure your heirs will have a greater inheritance when you pass away.