There are more than 600,000 seniors have who obtained reverse mortgages in the recent times which has helped them to save their homes. However, there are certain myths which confuse the senior citizens and they do not know whether or not it would be beneficial for them to go for a reverse loan.

Take a look at some of the common reverse home loan myths and the facts regarding it:

Myth: Mortgage lender will own the home if I take a reverse mortgage.
Truth - Though most homeowners believe that the reverse loan lender would own the property, the fact remains that homeowners will be able to retain the title and ownership to their home during their lifetime. They may even sell off the property whenever they wish to but they will have to pay off the dues after the property sale is over.

Myth: Heirs will be responsible for the repayment of the loan.
Truth - The property is sold off to pay the loan after the homeowner is deceased or decides to leave the home for other reasons. The heirs will not have to repay the loan. However, if the heirs want to keep the property, then they would have to pay the balance in full.

Myth: The lender will evict me if I outlive my life expectancy.
Truth - Reverse home loan lenders cannot put a time limit on how long seniors will be able to stay in their homes. The borrowers are still the owners of the property. Thus, the lenders will not be able to evict them if the borrowers follow the required guidelines of the loan.

Myth: Reverse mortgage proceeds cannot be used as per my wishes.
Truth - There is no such restrictions in case of usage of reverse mortgage proceeds. The funds can be used for any purpose. The funds from the loan can be used to pay off debts, to improve home, have a financial reserve, etc.

Due to the increase in mortgage defaults, the Federal Housing Administration (FHA) is about to change its lending criteria. As we all know, FHA is not directly involved in lending but it insures the lenders in case the borrowers default their mortgage dues. FHA has proposed changes regarding the insurance premiums, mortgage down payments etc. Just take a look:

Rise in mortgage insurance premium: The borrowers, who take up FHA sponsored loans, have to pay an insurance premium of 1.75% of the loan amount. This has to be paid upfront but can be rolled in the loan. FHA is planning to increase this premium to 2.25%. This is the second time in the last 2 years that the insurance premiums on FHA loans will be raised.

Changes in down payment requirements: Presently, the minimum down payment requirement for a FHA backed loan is 3.5%. This limit will remain the same but the borrowers who have a credit score less than 580 will have to make a down payment of 10%. It is true that FHA loans are not solely based on credit score, however, lenders prefer borrowers who have a score of 620.

Experts are of the opinion that FHA down payment requirement should be raised further. Some of them have proposed to increase the down payment from 3.5% to 5%.
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A borrower needs to pay mortgage insurance premium (MIP), if he buys home with an FHA mortgage and puts down less than 20% of the purchase price. But is it possible to avoid paying MIP, even though you’re making less than 20% down payment?

Well, one of the posters in MortgageFit forums has a similar query. He intends to make a down payment of 3.5%-5% on an FHA loan to buy a home for $320,000. But he says the house is appraised by the lender at $410,000. He asks:

Can he remove the MIP since there’s enough equity in the home?

FHA requires a borrower to pay an upfront mortgage insurance premium of 1.75% and an annual premium of 0.55%, if he makes less than 20% down payment. The MIP can be canceled when the loan-to-value (LTV) ratio of the property reaches 78% of the original home value. However, the payment of MIP for the first 5 years is mandatory for FHA loans with terms of more than 15 years. Thus, if the poster is going for, say, a 30 year FHA mortgage, he’ll not be able to remove the MIP within the first 5 years, even though the LTV is 78% or lower.
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It is a well known fact that the Fair Credit Reporting Act gives us the rights to dispute the incorrect information mentioned in our credit report. However, most of us do not know how to file a credit report dispute. Here are a few steps which may help you file a credit report dispute:

1. Letter to the credit bureau: You’ll have to write a letter to your credit bureau mentioning the item that you want to dispute. If you want to dispute two separate items, then send two separate letters to the bureau. You should also demand a return receipt of the letter. You should mention your name, social security number and address in the letter for verification.
2. Wait for 30 days: Once you receive the return receipt from the credit bureau, you’ll have to wait for 30 days. This is the time period required by credit bureau to investigate the item and remove it from your credit report.
3. Demand Letter: After 30 days have passed and if you did not receive a verification of the disputed item from the credit bureau, send them a demand letter. In this demand letter, you should ask the bureau to remove the item from your credit report as the investigation period of 30 days is over. You should even attach a copy of your dispute letter and return receipt with the demand letter.
4. Wait for 15 days: You should at least give the credit bureau a time period of 15 days to reply to your demand letter. (more…)

Recently, there has been a discussion in the forums where a poster in Arizona has sought suggestions from the community members regarding deficiency from foreclosure and taxes to be paid on it. Given below is the situation described by him in the forum:

The value of the poster’s current home in Arizona is low and if he sells it, there will be a deficiency of around $50k on the first mortgage. The poster says the home cannot be rented due to the present market condition. He wants to buy a new home in New Jersey and let this home be foreclosed. He has a credit score of 700+ and makes enough to afford one mortgage. He asks:

1. Can the lender sue him for deficiency in Arizona?
2. Can the lender come after his home in NJ for the deficiency in AZ?
3. Will he owe taxes on the deficiency?

Deficiency judgment in Arizona

If the poster cannot rent or short sell the AZ home in this market and lets it go into foreclosure, he will be responsible for the deficiency. Lenders in Arizona do have the right to pursue deficiency judgment against borrowers, provided the property is not less than 2.5 acres and it is not used as either a single 1-family or single 2-family primary residence. However, lenders will have to get the deficiency judgment within 90 days after the trustee’s sale.
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When you’re served with a complaint for divorce, it’ll create problems both financially as well as mentally. People are confused after receiving the complaint and don’t know what to do. Thus, they commit certain financial mistakes which can later on cause further problems for them. Check out some of the common financial mistakes that you should avoid during divorce:

• Do not try to hide marital assets: Once you receive the Complaint for Divorce, you will be subject to an Automatic Restraining Order. Under this order, your spouse and you are barred from selling, disposing or hiding your marital assets. Thus, do not try to transfer the money from a joint account to your separate account. You will also not be able to hide the car or cash in the stocks. However, you can definitely use your separate account for all your regular expenses.

• Do not be emotional about your property: When you receive the complaint for divorce, it is true that you’ll be emotionally shattered. But it’s of no use being emotional. Rather you will have decide as to who can afford the property. If you feel that your spouse will be better off handling the property and the mortgage, then let him/her have it. You may even check out if selling the property will be a better option. If there is a profit from the sale of the property, then it’ll be divided amongst both of you.

• Don’t let your spouse decide everything regarding finance: You should take initiative and take your own decisions regarding finances. Gather the financial records such as tax returns, insurance papers, brokerage account statements, retirement account details, bank statements, stock statements, etc. While you visit your divorce attorney, he/she would require these documents.

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