Pearland Texas Real Estate

Baby Boomers: Retire Reverse Mortgages Gain Popularity

This week I received another great newsletter from Lisa Coleman, Sr. Mortgage Consultant for Hometrust Mortgage on the rising populatrity of reverse mortgages with Baby Boomers. She has graciously allowed me to share it on my blog.

Born between 1946-1964, the generation known as the Baby Boomers will begin to retire in large numbers, substantially shrinking the labor force in the US. As a result, Social Security, Medicare, and other government programs will be significantly affected over the next several years. In fact, the Social Security Advisory Board (SSAB) estimates that, by 2030, about 20% of the American population will be 65 years old or older.

With rising costs of living and a dwindling budget to accommodate the elderly and disabled, we will see increased usage of the reverse mortgage. This loan allows equity to be taken out of the home to meet day-to-day expenses, and was designed in the late 1980s to help those who owned property, but lacked sufficient income to live on. However, there are benefits and disadvantages to be considered before going into this type of loan.

In most loan scenarios a home will go into foreclosure if payment is not made. If payments are made, the debt decreases and equity increases. The opposite holds true for a reverse mortgage; equity is taken out of the home to sustain the family, causing debt to increase while equity decreases. There is an exception - if the actual value of the home increases, less equity will be lost overall.

Most reverse mortgages are set up so there is no monthly payment as long as the owner resides in the home. There are no minimum income requirements, and the money can be used for any purpose. Equity disbursed from this type of loan is tax-free. Depending on the type of plan, reverse mortgages will usually allow the owner to retain the title to the property until they have lived in a different residence for 12 months, sold the property, died, or the end of the loan term has been reached.

On the flip side, reverse mortgages can be more costly than a normal equity loan. Interest is added to the principal balance each month, and the amount of interest owed is compounded over time. The interest will not be tax deductible until the loan is paid off, in part or in full. Also, since the reverse mortgage uses equity in the property, this constitutes a loss of assets one could pass on to heirs.

The Federal Trade Commission warns of abuse with this type of loan, as they have received reports of predatory lenders taking advantage of the elderly. It is best for the individual interested in a reverse mortgage to research and obtain counsel from reputable sources.* HUD does not recommend consulting an estate planning service to obtain a referral to a lender. HUD provides this information free to the public. Even if the home loan was not originally an FHA loan, the reverse mortgage can be federally secured.

For more information, please contact Lisa Coleman at (281) 910-8114 or at LCLending@comcast.net.

You can also find other great infomation at her website: www.LCLendingTeam.com

Do you need downpayment help to purchase your home?

Are you a professional educator, employed by a school district, fire fighter, police offer or emergency medical personnel?

Then there may be a program to help you!

The Texas State Affordable Housing Programs are for Professional Educators and "Texas Heroes". They receive a 3% grant towards their closing costs and down payment.

A Professional Educator is defined as a full time Classroom Teacher, Teacher Aide, School Librarian, School Nurse or School Counselor employed by a public school district in the state of Texas; or a full time faculty member * of either an undergraduate or graduate professional nursing or allied health program in the State of Texas.

A Texas Hero is defined as being a full time, paid Firefighter, Emergency Medical Services Personnel, Peace Officer, Corrections Officer, Juvenile Corrections Officer, County Jailer, or a Public Security Officer working in the State of Texas.

The homebuyer must additionally:

• Have a household income at or below 80% of the Area Median Family Income (AMFI)
  
• Be a first-time homebuyer, having not had an ownership in any principal residence during the last 3 years
• Reside in the State of Texas
  
• Meet standard underwriting requirements which demonstrates credit worthiness
  
• Occupy the purchased home as their primary residence
  
• Complete a HUD approved homebuyer education course prior to closing on the home loan.

For more information on this program, please contact Kim Babineaux, Sr. Mortgage Consultant, at 713-369-6554 or kbabineaux@hometrust.com. If you are interested in seeing what sort of are homes for sale, please give me a call at 281-412-2022 - I would love to show you around!

I recently read an article from American Home Shield about the Top 10 Mortgage Mistakes buyers make. The article made several good points, but what stood out the most to me were that several of the list's mistakes where ones that first time homebuyers make.  I call these "Rookie Mistakes."

Rookie Mistake #1: Looking for a home before you're preapproved.

You should never start looking for homes before you are pre-approved. Primarily because you may very well be looking in the wrong price range which can easily set you up for disappointment is you are not preapproved.

Rookie Mistake #2: Avoid verbal agreements and ask for everything in writing.

Even if you verbally come to an agreement with the buyer or seller, always make sure the agreement is part of your contract or in some form of writing. Be sure that both parties have signed the written agreement.

Rookie Mistake #3: Don’t just look for the lowest rate.

You’ll want to consider the APR, origination fees and discount points from all potential lenders. Not all fees are broken out or outright disclosed – don’t hesitate to ask for a full breakdown of the numbers. Do your research by asking friends and family for recommendations, look for customer reviews online and meet with a few different lenders before you make your choice.

Rookie Mistake #4: When you lock in at the rate you agreed upon, get it in writing.

Obtain a written document detailing your interest rate, the length of your rate lock and any details like discount points, etc. Make sure you and your lender have seen and signed this document. 6. Know what you REALLY afford. You know what you can and can’t afford on a monthly basis. Setting a price limit and calculated budget help you determine exactly where your money goes, how you can cut costs and what you can truly afford to pay for a home. It’s not just a mortgage payment, you’ll want to include property taxes, insurance, potential homeowners dues and utilities. Don’t go borrowing what a lender is willing to lend you – stick a healthy, affordable price.

Rookie Mistake #5: Always have a professional home inspection.

Even if you’re buying a new home with a warranty, it’s still a good idea to have a 3rd party inspect your home. An independent inspector can help put together a report that may help you with negotiating. You’ll certainly know more about what you’re purchasing and getting yourself into before signing on the dotted line.

Rookie Mistake #6: Shop around for homeowners insurance. You could save a few hundred dollars when you shop around for homeowners insurance. If you haven’t already, you can combine policies and often receive discounts for multiple policies.

If you would like more information on the right way to handle your first time home, please give me a call at 281-412-2022.  I have over 15 years experience in the Pearland real estate market and I'd love to be your Realtor!