Some areas of my business are tougher than others. Tackling the question and reasoning behind the costs of getting a reverse mortgage is one of them.
The truth is HUD backed insured mortgages have higher closing costs than forward mortgages. I always make a point of telling this to my customers as soon as I can.
FHA insured mortgage upfront costs are high for 3 reasons: First, the lender performs an appraisal on the home and charges costs on the value of that appraisal, not the money the borrower is qualified to receive.
Additionally, HUD charges a two percent fee, based on the value of home up to four hundred-seventeen-thousand dollars. Lastly, the mortgage company charges a transaction fee (origination fee) which can be one percent above normal.
You don't need to pull out the calculator to get the basic gist... Costs are not so customer relations friendly.
As far as the origination fee goes, one could make the case that it is not more expensive than a forward mortgage. The difference is forward mortgages build the fee into the rate.
Much of the differences in comparing closing costs between forward and reverse mortgages comes down to the FHA upfront mortgage insurance. For a home valued at $417,000 just the MIP is over $8,000. It's no doubt a bundle, but without it, most of the same people griping about costs couldn't use this tool.
To illustrate this point a 70 year old client with a 200 thousand $ mortgage, getting a HUD backed reverse mortgage, is entitled to receive somewhere in the neighborhood of $130,000.
Non-FHA products are not really in existence anymore. However, Fannie Mae had one prior to dumping it in the fall of '08. Here is one of the reasons why it's gone. The same customer would have been eligible to receive less than one hundred thousand dollars.
Why ? Because the FHA insurance, everyone is so unhappy about, allows lenders to feel comfortable enough to lend such large amounts.
The biggest danger to a lender is the possible event that more is owed on the home than the actual value. The mortgage insurance covers lenders in this event.
Expensive, horrible, bitter FHA insurance hedges the lender's risk, which makes much more money available to borrowers. But in the end it allows so many seniors to solve stressful financial issues.
The truth is HUD backed insured mortgages have higher closing costs than forward mortgages. I always make a point of telling this to my customers as soon as I can.
FHA insured mortgage upfront costs are high for 3 reasons: First, the lender performs an appraisal on the home and charges costs on the value of that appraisal, not the money the borrower is qualified to receive.
Additionally, HUD charges a two percent fee, based on the value of home up to four hundred-seventeen-thousand dollars. Lastly, the mortgage company charges a transaction fee (origination fee) which can be one percent above normal.
You don't need to pull out the calculator to get the basic gist... Costs are not so customer relations friendly.
As far as the origination fee goes, one could make the case that it is not more expensive than a forward mortgage. The difference is forward mortgages build the fee into the rate.
Much of the differences in comparing closing costs between forward and reverse mortgages comes down to the FHA upfront mortgage insurance. For a home valued at $417,000 just the MIP is over $8,000. It's no doubt a bundle, but without it, most of the same people griping about costs couldn't use this tool.
To illustrate this point a 70 year old client with a 200 thousand $ mortgage, getting a HUD backed reverse mortgage, is entitled to receive somewhere in the neighborhood of $130,000.
Non-FHA products are not really in existence anymore. However, Fannie Mae had one prior to dumping it in the fall of '08. Here is one of the reasons why it's gone. The same customer would have been eligible to receive less than one hundred thousand dollars.
Why ? Because the FHA insurance, everyone is so unhappy about, allows lenders to feel comfortable enough to lend such large amounts.
The biggest danger to a lender is the possible event that more is owed on the home than the actual value. The mortgage insurance covers lenders in this event.
Expensive, horrible, bitter FHA insurance hedges the lender's risk, which makes much more money available to borrowers. But in the end it allows so many seniors to solve stressful financial issues.
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2 fabulous place to get information to help would-be Texas reverse mortgage borrowers get a grasp of and help decide if the Texas reverse mortgage may be the right choice click on either of the 2 links in this section.
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