A Hud Reverse Mortage For Retirement?

HUD reverse mortgages can be a great tool for Seniors that are looking for additional funds for retirement. Through a HUD reverse mortgage, seniors can tap into the equity from their homes without having to make repayments.

 HUD Reverse Mortgage Eligibility Homeowners must meet the following criteria in order to be eligible for a HUD reverse mortgage:

 - Homeowner must be age 62 or older.

 - The home must be owned free and clear or have a mortgage balance that can be paid from equity.

 - The home must be a principal residence. 

- The property must be a single-family home, a one-to-four unit dwelling with one unit occupied by the applicant, a manufactured home (mobile home), or a unit in condominiums or Planned Unit Developments.

 - The property must meet minimum property standards.

Homeowners that qualify can receive payments in a lump sum, on a monthly basis, or on an occasional basis as a line of credit. At a later date the payment options can be restructured if circumstances change.

 Guidelines on HUD Reverse Mortgage Amounts The amount that can be borrowed on a HUD reverse mortgages is determined by the following criteria:
- The borrower's age.

- The older the borrower the more that can be borrowed against the value of the home.

- The loan interest rate.

- Obviously the lower the interest rate the more that can be borrowed.

- The home's value.

- There is no hard limit for home value to qualify for a HUD reverse mortgage, but the amount that may be borrowed is capped by the maximum FHA mortgage limits for an area.

This means that owners of a high priced home can't borrow any more than the owners of homes valued at the FHA limit. There are no asset or income limitations on borrowers receiving a HUD reverse mortgage.

 Unlike ordinary home loans, a HUD reverse mortgage does not require repayment as long as the home remains the borrowers primary residence. When the home is sold the Mortgage company recovers their principal, plus interest, and the remaining value of the home goes to the homeowner or to his or her survivors. Should the sales proceeds not cover the amount owed, HUD will pay the mortgage company for any shortfall.

 The Federal Housing Administration, which is part of HUD, collects an insurance premium from all borrowers to provide this coverage. Typically the mortgage company pays for this insurance and charges it to the borrower's principal balance.

This FHA reverse mortgage insurance can make HUD's reverse mortgage program less expensive to borrowers than private programs without FHA insurance.

A Mortgage Secret for First-Time Buyers: It Can Pay To Buy More

It's not easy to buy a first home, so here's a suggestion that may be surprising: Instead of buying one residence, buy several. What I'm suggesting has nothing to do with late night infomercials or books that promise fast and easy wealth from real estate. Instead, many first-time buyers can benefit from an interesting quirk in the mortgage system.

 When you hear people talk about "real estate financing" they generally divide mortgages into two categories; loans for owner-occupants and more expensive and tougher loans for investors. "Investment financing" is for buyers who do not physically reside at a property. "Owner-occupant" loans are for homes, the places where we stay at night, the phone rings and the car is parked. But there's a wrinkle:

 Owner-occupant financing with little down and low rates is typically available for the purchase of more than a single-family house. Normally you can get owner-occupant financing for properties with one-to-four units as long as you use one as your prime residence.

 In other words, your status as an owner-occupant allows you to buy more than just a house or condo. You can actually buy property that produces rent and increases your tax deductions. When you buy properties with two-to-four units the world of real estate financing changes. Lenders will apply most of the rent to your income for qualification purposes.

This means you can borrow more -- and also that you can offset loan costs with the rents such properties produce. Suppose you buy a property with four units. You'll live in one and rent the others. Each of the three rental units has a fair market rental of $1,000.

 In this situation you're likely to get two benefits.

First, the lender will count some portion of the rent -- say three-quarters -- as income for you when determining your qualification standards. In other words, $2,250 a month will be added to your income. ($1,000 x 3 units = $3,000. $3,000 x 75% = $2,250)

Why $2,250 and not the whole $3,000? Because the lender assumes you'll have vacancies, repairs, insurance, taxes and other costs for the rental units. The lender also assumes something else:

For tax purposes, three-quarters of the property in this example will be "investment" real estate. When reporting your income taxes you'll list your rents and costs for these units. One of these "costs" will be depreciation, an accounting device that will lower your taxes but take nothing in cash from your pocket.

 When lenders see depreciation they "add back" that cost when looking at your monthly income. The result is that your effective monthly income for loan qualification purposes will increase even more than $2,250 in this example. Buying two-, three- and four-unit properties can make great sense, especially for first-time buyers. You'll have "help" meeting monthly mortgage payments, especially in the first few years of ownership -- the time that's often the most difficult.

Later on, if you elect to move you can sell the property or you might choose to keep it and just rent out the unit had been your residence. As with all investments, neither annual income nor rising property values can be guaranteed. Some owners may feel uncomfortable having tenants so close and there's always the potential for insufficient rents, excess vacancies and big repairs.

 Also, beware of going too far. While up to four units is okay, five units automatically classifies the property as "investment" real estate under the guidelines for most loan programs, a title which means you cannot use owner-occupant financing even if you live on the property. The good news, though, it that as an owner/occupant and also as a landlord you'll learn a lot about the practicalities of real estate investing. Real estate ownership requires ongoing maintenance and oversight.

As an owner-occupant with a few units, you'll learn "on the job" about making repairs, dealing with tenants, hiring contractors and maintaining property. These are valuable lessons which can provide income and wealth over a lifetime. In fact, many people who've become successful in real estate often started with just one small property, owner-occupant financing with little down -- and two to four units.

 For details, speak with appropriate professionals. Lenders can tell you about available financing; real estate brokers can provide information regarding local rental patterns plus you'll want a pro to explain the tax benefits of multi-unit ownership.