Planning to take out a FHA backed reverse mortgage? Well, the pipeline has just got narrower. Starting from January 2014, the reverse mortgage borrowers will have to qualify under the new financial assessment. The financial assessment will cover their credit history, household cash flow and debt levels. The main aim of these new changes is to limit the maximum loan amount that seniors can take out against their homes.
Changes that will affect the reverse mortgage borrowers
Here are some of the changes which will come into the FHA backed reverse mortgages and affect the borrowers. Let's take a look:
1. Financial assessments: January 2014 onwards, when a senior applies for a reverse mortgage, he or she will have to qualify under the new financial assessments. This will let the lender know that you are capable and willing to pay off the financial obligations that comes along with the loan. This will include checking of the credit history, household cash flow and debt levels of the loan applicant.
2. Keep aside money: Under the new rules, the reverse mortgage borrowers will have to set aside a certain portion of their loan proceeds in order to pay off their property taxes as well as hazard insurance over the years.
3. Higher mortgage insurance fees: Applicants may have to pay substantially higher FHA insurance premiums if they take out 60% or more money upfront at the time of closing.
How will it impact the reverse mortgage market
The lenders and brokers who are associated with the reverse mortgage market opine that the limits on the amounts that seniors can draw down, excessive financial checking of applicants and the higher mortgage-insurance fees will reduce the attractiveness of this loan option. These new changes will bar many needy people from taking out a reverse mortgage.
We'll have to wait till the next year in order to find out how the new changes will affect the reverse mortgage market.