Home Mortgages – Get to know more

A common reality that every aspiring homeowner has to face is that they cannot, on their own, have the essential cash needed if they wish to own a house. This problem could even bear more impact among those people who have less than perfect credit scores as they cannot seek assistance through regular home loans from financing firms. However, these days, one can still get the funds that he needs through subprime mortgages.

Whether we like it or not, there will always be a sort of discrimination applied by lending firms to borrowers who do not meet the essential credit ratings that they require. This may be disadvantageous to the borrower’s point of view, but if you look at it the financial institution’s way, this is their way to protect their ventures from being placed in too much risk by accommodating people who may not be able to pay back the money that they owe.

Fortunately for these borrowers, there are now lenders that provide their services in assisting home loan applicants who have generally less than attractive credit ratings- usually those below six hundred. Thus, they mainly cater their services in providing financial assistance to those people normally would not be qualified in availing of conventional home loans.

One has to understand that every provider of financial grants and loans out there faces certain risks whenever they lend their money to their borrowers. These risks are considerably higher in the case of people who seek assistance through subprime mortgages. Thus, providers would need to find ways on how they can counter such risks to be able to safeguard their businesses as well. As a result, borrowers who avail of this type of assistance will have to expect higher than usual interest rates.

Firms that offer these types of assistance generally target their services to consumers who cannot be entertained by regular and traditional financing firms. Over the years, they have provided their services to individuals who are often excluded from the credit market- people who are discriminated against, and those who do not possess that much money in their bank accounts to allow them to process any down payment.

There are certain characteristics that borrowers of these plans possess. One of this is that many borrowers do not possess any property or asset that can be utilized as security for the transaction. Thus, the provider cannot get any type of collateral from the borrower, which he may be able to sell to gain back the costs in case the borrower will default on the payments.

Most of the people who take advantage of these offers are those who have incurred excessive debts from various providers. Many of these individuals only earn incomes that are enough and even barely enough to cover for their daily living expenses. Thus, most of them have to rely on financing institutions to help stretch out their already meager incomes.

Staying Home Reverse Mortgages

With nearly 28 million Americans already at or past the age of 62, the need for long-term health care is growing. Currently, the cost of long-term care is paid primarily by consum­ers and the federal Medicaid program to skilled nursing facilities, but many older Ameri­cans, even those with serious health issues, would rather live at home. The challenge they face is that in-home care can be prohibitively expensive. Now, however, there is an option: a reverse mortgage.

Reverse mortgages have been around seemingly forever, but the most recent and popular format is the U.S. De­partment of Housing and Urban De­velopment (HUD) program known as HECM, which allows senior citizens to convert equity in their house into cash. For many, home equity provides a financial resource that can make a huge difference in a family’s ability to pay for long-term care.

A reverse mortgage brings in tax-free income, but the homeowner retains title to the property and doesn’t take on new monthly mortgage payments. According to Darryl Hicks, associate director of the National Reverse Mort­gage Lenders Association (NRMLA), “The biggest misconception is that a person does not retain ownership of their home, and that is simply untrue. You always retain ownership.”

You may qualify for a reverse mortgage even if you have an exist­ing mortgage on your home. Once you are approved, the funds can be disbursed in one lump sum, in fixed monthly payments, as a line of credit or as a combination of any of these three options. Proceeds from a reverse mortgage can be used for almost any purpose, from supplementing retire­ment income to preventing foreclosure.

No monthly payments are due while the loan is outstanding, but the loan must be repaid when you no longer oc­cupy the home as a principal residence. The amount owed on the reverse mort­gage can never exceed the value of your home, and the difference between what you owe and what your home sells for will return to your estate.

You should consider a few factors before applying for a reverse mort­gage, including upfront costs, how long you intend to stay in the home and less-expensive ways to obtain money to pay for health costs and other necessities. Your decision should depend on your individual situation, but, if you meet the criteria and wish to remain at home rather than in a nursing home, a reverse mortgage might well be a viable option.

HUD requires all applicants to receive advice from an approved counselor to make sure the program is right for them.

“The bottom line is to work with a lender you are comfortable with be­fore signing any closing documents,” says Hicks. “Be sure you understand everything, and don’t be afraid to ask questions.”

Stacy E. Domingo