Financing retirement years can be extremely difficult; many baby boomers will need to consider how the value of their homes can help.
Reverse mortgages could play an integral role of many retirees’ financial plans, especially for those who wish to remain in their homes, but need cash. Currently, most anyone can qualify for a reverse mortgage — no underwriting or credit scores necessary. But it may not always stay that way.
A large portion of reverse mortgages, which allow homeowners 62 and older to utilize their home equity, are made through the Department of Housing and Urban Development, whose Federal Housing Administration (FHA) arm insures the loans. However, due to declining home prices after the housing crisis took a major toll on the federal program. Also contributing to the decline was the FHA’s elimination of the type of mortgage that allowed homeowners to withdraw the maximum amount of money available in a big lump sum.
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And in an effort to strengthen the program, the agency has raised its fees and reduced the amounts people could borrow over the last few years. Most recently, the FHA claims it will have to take even more drastic steps by the beginning of its new fiscal year in October. As a result of the turmoil in the housing market and a number of borrowers inability to pay their property taxes and homeowners insurance over the long term, the FHA wants to require borrowers to undergo a financial assessment. Borrower’s credit scores may also be factored in, for the first time.
Christopher J. Berry is a Michigan elder law attorney Dedicated to helping seniors, veterans and their families navigate the long-term care maze. To learn more visit http://www.theeldercarefirm.com/ or call 248.481.4000