Housing Archives - KNS Financial

Reverse Mortgage FAQs

As more and more people are choosing reverse mortgages, there are several questions which come up. While many of these questions will be specific to your case, there are others which apply to almost every reverse mortgage application out there. With that in mind, here are the more important reverse mortgage faqs you should ask.

Reverse Mortgage Faqs

1) What a Reverse Mortgage?

Reverse mortgages are loans for seniors which allow them to tap into the equity they have built up in their homes. Unlike traditional mortgages or home equity lines, the borrower does not need to make a monthly payment. Instead, all they need to do is to pay the property taxes, insurance, and utility costs for the home.

Another condition of a reverse mortgage is that it must be the borrower’s primary residence. In addition, these loans are only made available to seniors over the age of 62. Now, these mortgages are available across the country, but you probably want to find a local and reputable lender to walk you through the application process.

2) Who Owns the House?

Like traditional mortgages the home is still owned by those residing there – the bank just places a lien on the property. However, you will want to read the terms of the loan agreement, especially the amortization schedule when the loan extends to year 10 or 15, or longer.

3) Why Would Someone Get a Reverse Mortgage?

For many people, their home is the most valuable asset they own. In addition, today’s seniors have had to live through some of the most tumultuous economic periods in our history.

Granted, when times were good, they were very good. However, when times were bad, they were very bad. In addition, there is the changing employment picture. As such, many seniors lack the savings needed to enjoy their retirement.

Enter reverse mortgages, which have become a popular option to help seniors make ends meet during their retirement. Not only do these mortgages help to freeze monthly mortgage payment, but they also give the borrower the ability to access the equity they have built up in their homes.

4) What Are the Qualifications?

First, you must be over the age of 62. In addition, you will need to show that have the income to pay your homeowner’s insurance, property taxes, and utilities. Many reverse mortgages will also require that you will need to properly maintain the house.

Lastly, a reverse mortgage is only for your primary residence. While some private-label reverse mortgages might cover vacation homes, the Federal Housing Administration (FHA) variety of reverse mortgages must be for where you live.

5) What are the Risks?

As most reverse mortgages are insured by the FHA, then tend to be safe. You want to make sure the loan you are getting complies with the FHA’s rules.

If not, then you will want to talk to another lender.

6) Will My Property Qualify?

The list of eligible properties includes everything from single-family homes, multi-family homes (however, the borrower must live in one of the units), as well as certain condos and manufactured homes.

If you are not sure if your property will qualify, then you need to talk to your loan counselor.

7) How Much Can I Borrow?

The answer to this question largely depends on where you live. However, the national loan limit was raised this year to $636,150.

Keep in mind that just because the loan limit is set at this level does not mean you can borrow the entire amount. Under the rules of reverse mortgages, you will need to pay off your existing loan and generally there is a limit based on the home’s actual value.

8) Can the Bank Foreclose?

As long as you follow the terms of the loan, then you won’t have to be concerned about foreclosure risk.

Just remember you need to ensure the home remains registered as your primary residence and that you will need to keep up the payments on taxes, insurance, and utilities.

9) How is a Reverse Mortgage Repaid?

You loan will come due as soon as you no longer live in the home. As such, you will need to plan for repayment at this time.

The way it works is simple. You either sell the home and the lender will be repaid at closing, or you will need to notify the bank of your change of address and then make plans to repay the loan at that time.

Putting Your Home Improvement Dollars to Good Use

By Khaleef Crumbley

Homeowners ready to remodel a home or improve a dwelling should consider how they’re going to pay for the repairs. With interest rates still low, there are a number of ways to secure financing without having to go into debt. The following are suggestions to help you put those dollars to good use.

Finance an Interior Remodeling Project

Interior home projects such as a bathroom, kitchen or master bedroom suite remodels can improve the space in your home. They can also boost your home’s value. As a matter of fact, a kitchen or bathroom overhaul can average 60 to 70 percent return on your investment. A 203k home renovation loan is ideal for dwellings that are considered a fixer upper. It provides the funds needed to make the repairs and at a reasonable rate. It also allows you to come away with instant equity.

Some trusted projects that can enhance your home include new flooring, updated cabinets and fixtures. Energy star efficient appliances can also be a major improvement as they cut down on utility costs. They are also better for the environment.

Make the Rooms Bigger

The open concept seems to be extremely popular with today’s prospective buyers. Having a clear view of the living room from the kitchen allows a family to stay connected. Open floor plans also allow parents the chance to keep an eye on their children while they’re cooking dinner. Master bedroom suites and spacious bathrooms can be great renovations that will see a return on your investment.

Change in Styles

Even if your home is newer, the style or colors can still be outdated. When you’re ready to invest in the low interest rates of a loan, stick to neutral colors. Changing fixtures, toilets, showerheads and light fixtures can improve its appearance. Wood flooring and ceramic tile are other favorable choices among today’s homeowners.

Hire a Contractor

Major renovations can require plumbing and electrical changes. If you’re making a room bigger, you may have to knock down walls. To ensure that the job is done correctly, you may want to hire a licensed contractor.

Before you enlist their help, get several quotes. Compare the prices with other contractors to make sure you’re getting the best deal. Certain renovation loans may require you to get a detailed list of the work involved.

Update Your Landscaping

If you’re considering a sale in the future, you may want to redo your home’s outward appearance. Cracked concrete or crumbling asphalt driveways can take away from your home’s curb appeal. You can also add shrubs, trees and mulch to freshen it up. A brick patio, wood deck and paint can also add up to cost-effective improvements on your home.

Spend Your Money Wisely

You can add gold fixtures to your dwelling, but you won’t be able to recoup the costs. When you’re considering a home renovation project, you want to take the other homes in your neighborhood into consideration. Adding simple improvements will keep your home within price range of the others in your community. Going overboard by making a home too large or exotic can be a waste of money. When you’re considering colors and other options for your project, keep the repairs neutral. You may fancy avocado green paint or a lush garden, but you could turn off future potential buyers.

Smart Updates

Homes are getting smarter because of the latest technological advances. They can also dumb a homeowner down if you’re not technological savvy. Smart updates such as security systems can be instrumental in keeping the home safe. Updating your household with the latest plumbing fixtures, HVAC systems, air purifiers and air conditioners can be costly. You also won’t be able to get your money back when you sell.

Solar Energy: A Viable Option

By Sherrian Crumbley

In a world that is racing to slow down the effects of global warming, solar energy has quickly become a contender in alternate energy resources. While not a perfect solution, it is one that the individual can take into his/her own hands, and it is beneficial to quell the rising cost of electricity and gas. There are many factors to determine solar energy’s true cost and benefit, but here are some of the reasons why it is worth further exploration.

Monetary savings on utility bills. The average American household uses 920 kWh per month. Some solar installation companies guarantee an average of >800 kWh per month. In conventional relationships with utility companies, the customers are totally dependent on them for electricity and gas needs. Solar power users are able to gain a measure of independence from their utilities with utility bills possibly being lowered by 50% or totally eliminated.

The average 20 year savings were estimated to be a little over $20,000 for Americans who went solar in 2011. This number went up substantially in heavily populated cities. Even if the solar panels aren’t able to supply all their power needs, they will be relying on conventional power a lot less. In the chance that a customer produces more power than they need, the utility company may pay them for it. Solar energy has the possibility of changing from a saving mechanism to an income stream.

A reduction in carbon footprint. Through the use of an energy conversion calculator, studies have shown that the average American household generates 7.4 tons of carbon dioxide per year through electrical use. Carbon dioxide has been shown as a major cause of global warming, along with other emissions such as methane and additional particulates.

The production of solar panels does produce some substances that are unsafe to the environment, but the impact is minimal. Also, it pales in comparison to fossil fuel emissions and does not require any mining or drilling as found in more conventional energy sources. Also, solar panels and stations carry a much smaller physical footprint than conventional or nuclear power stations.

Although controversial, government subsidies have helped to make solar power cheaper and more available. There has been some benefit from this since the cost of a solar-power plant has dropped by 22% in 2010-13. In sunnier places, solar power is providing electricity to the grid as cheaply as standard coal- or gas-fired power plants.

Reduce reliance on foreign and nonrenewable energy sources. The sun is a reliable resource. We do not have to worry about sunlight running out as we do with oil and coal. With the sun’s reliability and the simplicity of solar panels, a country gains the benefit of energy security. No one country is able to monopolize the sun’s energy which creates independence from home owner to their nation.

Some countries have been noted to have saved billions already in lowered imports of oil and gas from neighboring nations. The technology has the potential to eliminate questionable treaties with nations that would otherwise consider each other to be hostile. In the long run, such progress could boost the economic security of citizens as a result.

Solar energy does have some disadvantages. It is not a perfect solution. For instance, we can only harvest solar energy while the sun is shining. Due to this, we may always need to depend on an alternate energy source or means of storing energy. Also, solar power stations presently produce less energy than conventional ones, and they are more expensive to build and run. Although these and other factors exist that need to be worked out, it is too soon to throw the baby out with the bath water. We are seeing many benefits with solar energy that shows there is value in working through the difficulties.

Six Money Saving Tips for a First Time Home Buyer

By Kevin M

Up until about 2006, buying a home was a relatively low risk proposition, even for first-time homebuyers. But now that mortgage underwriting guidelines are more difficult, and property values are bouncing up and down like a yo-yo, you need to be more informed before making a purchase.

Here are six money-saving tips that will make the process easier, and remove at least some of the risk involved in purchasing a home as a first-time home buyer.

6 Money Saving Tips For The First Time Home Buyer

1. Buy Beneath Your Means

This first tip is one where you will have to push back against your real estate agent. The conventional wisdom – which will be strongly advanced by members of the real estate community – is that you should buy the most expensive house you can afford. The idea is that you will be able to more easily afford it as the years pass and your financial situation improves. There may be merit to this, but it’s bad advice for a first time home buyer, especially in today’s market.

It will be better for you to buy at least a little below your financial means. This will leave more room in your budget to pay for everything else in your life. When you buy above your means, you’re flirting with being house poor. No matter how much you love the house, being house poor gets old fast.

2. Buy Below Market

To the best of your ability, try to buy house at a price that is below the going market price. You should aim to buy a house at least 5% to 10% below the prevailing market value. If the house is reasonably worth $200,000, you should try for a settlement price of between $180,000 and $190,000.

This will give you some extra equity upon closing on the house. More important, it will provide some insulation in the event property values should fall.

It’s easier to do this in some markets than others, but you should always try. You never know how anxious seller is to make a deal. Those are the kind of properties that you want to buy – the ones you can get at least a bit of a deal on.

3. Get A Home Inspection

Many times a first time home buyer will resist this idea, because it means coming up with an extra $300 or so before closing. But this can be the very best money you can spend in the entire transaction.

A home inspection can provide the following benefits:

It can alert you about needed repairs; if you know about these upfront, you can have the seller fix them before closing, saving you a major headache later.
You can use repairs and other deficiencies to negotiate a still lower price on the property. A home inspection often provides you with a list of bargaining chips.
It can reveal that the property is a complete disaster, allowing you to get out of the deal before closing.

Spend the extra money for the home inspection, you’ll be glad you did.

4. Use A Real Estate Agent

Property sellers sometimes like to work without real estate agents, so that they can avoid having to pay the real estate commission. As a buyer, there’s no real advantage to not having the services of real estate agent.

The agent acts as a third-party negotiator between you and the seller, and that tends to be more effective than face-to-face negotiations. This is especially true if there are significant issues that develop along the way to the closing table. The agent acts as both a go-between and a shock absorber, helping to work out mutually agreed upon terms.

In addition, since real estate agents work in the business all the time, they know how the process works. They can present a written offer, handle negotiations, schedule the closing and home inspection, and even help you select the mortgage lender and closing agent. If you are a first-time home buyer, you will have enough on your plate without having to worry about all of that.

5. Save Up More Than The Minimum Down Payment

It’s natural for first-time home buyers to want to buy with as little money as possible, but that’s not how the real estate business works these days. The minimum down payment with an FHA mortgage is 3 ½% of the purchase price. If you are using conventional financing, the new normal will be more like 10%, or even 20%.

[What is private mortgage insurance, and is it really necessary?]

You should have your down payment saved in advance, but that’s not all. You should have at least a few thousand dollars saved up in excess of your down payment requirement. There are at least three reasons for doing this:

On conventional mortgages, lenders require that you have “reserves” in excess of the down payment, equal to anywhere from 3 to 6 months of the new house payment.
The extra money will come in handy with incidental and unexpected expenses related to the purchase, such as moving, establishing utilities, making minor repairs, and last-minute purchases.
It’s never a good idea to be broke immediately after purchasing a new home. Save some extra money to give yourself some breathing room after the closing.

6. Clean Up Your Credit Before Applying For A Mortgage

Some first-time home buyers don’t bother reviewing their credit before applying for a mortgage, but it’s to your advantage if you do. If you wait and let the mortgage lender run your credit, and there are credit problems, your loan could be declined. But if you obtain a copy of your credit report in advance, and fix any issues that show up, your credit report will be “clean” by the time the lender pulls it. That will improve your chances of getting a mortgage approval.

[See why a 15yr mortgage may not be the best choice for you!]

The underwriting guidelines for mortgage loans are still quite a bit tougher than they were a few years ago. You will need to enter the process in the best financial shape possible. Determining the quality of your credit is something you can and should do in advance.

Follow these steps, and not only will buying your first home be easier, but you’ll find the entire transaction – and subsequent ownership – to be a much more pleasant experience.

What kind of problems did you encounter as a first time home buyer?

How to Get Your Rent Security Back – All of It!

By Kevin M

If you are a tenant, the ability to get your rent security back can be an emotional issue. It’s your money, but it’s being held by your landlord – just in case. That last part is what you worry about. What if “just in case” turns into you’re not getting your money back?

There are ways to avoid that ugly scenario, and to get all of your money back.

Going back to the beginning – doing a thorough inspection at move-in

This is something that you really need to do before you even more into an apartment or rental home. But if you didn’t do it at the beginning, you should do it as soon as possible. What you want to do is establish the fact that the home might contain certain deficiencies that are not as a result of your occupancy.

[Here are 5 reasons why you may be better off renting than owning!]

It has become common in garden apartments for landlords to offer tenants a checklist that they can complete confirming the existence of any problems prior to move in. Even if your landlord doesn’t provide you with such a checklist, you should write a neat and detailed list on your own, and then send it to the landlord either by email or by certified mail so that you will have evidence that it was completed prior to move in.

Don’t cut corners with this step – it is your very best protection against being held responsible for problems you didn’t create.

Study your lease and give proper notice

Before giving your landlord notice of your intent to vacate the property, first study your lease in great detail, paying particular attention to the provisions dealing with the termination of the lease.

The lease should spell out the amount of notice the landlord requires. This is generally 30 or 60 days. Don’t assume that the landlord will know automatically that you intend to leave at the end of the lease. There is usually a notice requirement that relates to not renewing the lease.

Also, if you will be terminating the lease early, there should be written provisions in regard to any penalties for doing so. As a general rule, leases will contain language that will require you to forfeit at least one month’s rent if you break the lease. Be ready for this.

Be sure to pay your last month’s rent

Many tenants mistakenly believe that their security deposit covers the last month’s rent. In reality, your security deposit is to cover damage to the property upon the termination of the lease. Your last month’s rent is required even though the landlord is holding a security deposit.

This is especially important if you live in an area where the security deposit normally exceeds one month’s rent. In some areas, it is customary to pay first month’s rent, a security deposit, and the last month’s rent. In other areas, the security deposit is equal to 1 ½ month’s rent.

If you assume that your security deposit is for the last month’s rent, you could forfeit any amounts that exceed the monthly rent. The landlord can easily absorb the extra amount as a penalty for failing to pay your rent on time, or to exaggerate the cost of making relatively minor repairs.

Leave the property in better condition than you found it

Before leaving the rental property, be sure to go through it with a fine tooth comb, and make any necessary repairs. This is particularly important if the damage was done by you, but it can also help if you repair anything that was defective before move in, but didn’t report to the landlord.

[5 tips to prepare for a move.]

It should go without saying that you should leave the home in squeaky clean condition. Vacuum the carpets, mop the floors, and especially clean the kitchen and bathrooms. A landlord can charge a cleaning fee if you leave the property a mess. In addition, it can also cause the landlord to hunt around for other issues he or she can charge you for.

Leave nothing behind

Nothing irritates a landlord quite so much as a tenant who moves out, but leaves a couple of rooms full of furniture, or a basement or garage full of useless storage items, or a backyard filled with yard waste or old tires. If you brought it in – you need to bring it out!

A landlord can charge a hauling fee to remove anything you don’t take with you. And he will take it right out of your security deposit. Then he’ll start hunting for other things to charge you for.

Stay in close contact with your landlord after giving notice – and until your security deposit is returned

A little bit of diplomacy can go a long way in encouraging a landlord to return your security deposit. The relationship between you and your landlord should not deteriorate into open hostility as a result of your moving out of the property. Keep the lines of communication open, and do all that you can to coordinate your departure and the landlord’s transition to a new tenant.

By being a pro-active tenant, you will improve your landlord’s opinion you, and make it easier to get your full security deposit returned, and returned quickly.

Have you ever had trouble getting a rent security deposit back from a landlord?

photo credit: freedigitalphotos.net