A mortgage broker should be used because of the product availability that they have. They can be your one stop shop for all of your home financing needs. They work with hundreds, and sometimes thousands, of different banks and lenders to find the program that is right for you. A mortgage broker, also called a loan officer, can generally assist with all credit types, all income types and all available loan programs types. Having one person or team of people taking care of and familiarizing themselves with all of your financial needs and your specific situation is much more beneficial than utilizing someone to buy your home, then someone else to refinance your home and then someone new to obtain a home equity line of credit. A mortgage broker should be your trusted advisor, an excellent source of information and a link to finding other qualified and trustworthy referral partners such as realtors, homeowners insurance agents, home improvement contractors, etc… Use of a mortgage broker obviously has tons of benefits. Over 75% of all mortgages originated over the past couple of years have been handled by mortgage brokers.

Your mortgage broker can provide you with many more options than a banker in most cases. Having access to all types of banks gives brokers more options. While a banker has to do business based on their specific bank rules.

Using a mortgage broker gives you flexibility in regards to how you can have your mortgage structured. A mortgage broker is no different than a banker in the terms of providing a service, however the difference is what service they can be provided. To go into your local bank and apply for a loan will generally cause you to miss out on some value added programs that are not available to you through that banks product line. The overall time of closing is no different with a broker or a banker, and there is not an approval advantage with going with a bank, and can most times go quicker and smoother with a broker. There are many lenders out there that do not lend directly to the general public and that is where a broker can help you find those programs and terms that will benefit you most.

Mortgage lending is not like it was twenty or even ten years ago. Lenders have split up into niches. Will the bank that you apply at cater to your niche? Maybe or maybe not. Wouldn’t it be better to apply with a full service mortgage broker who can find the bank or lender that has the best program and rates for your situation?

A mortgage broker has to disclose the amount of money that they are making in Yield Spread Premium (also called rebate). Bankers do not have to do this. Would you like to know how much your mortgage professional is making off of your loan, or would you like to be left in the dark?

Yesterday, Alan Greenspan and the Federal Reserve raised the short term interest rate to 4%

According to an article in the Denver Post (it’s actually written by a Washington Post writer) the Feds will raise it to 4.5 percent by Jan. 31.

So if you have a Home Equity Line, the Prime Rate will be 7% on your next payment and 7.5% by early next year.

Until recently, seniors 62 years of age and older have not had the best choices when it came to getting cash from their homes. Traditional home loans only offered the option of either selling one’s house or borrowing against its equity.

With reverse mortgages coming on the scene, seniors now have some additional cash-flow alternatives. This type of loan allows mature borrowers to convert their home equity into tax-free income without leaving their current home or making mortgage payments – and they do not need an existing income to qualify.

How a Reverse Mortgage Works
Reverse mortgages are probably best understood when compared side-by-side with traditional home mortgages, otherwise known as “forward” mortgages. The following table shows the differences between the two:

Both loans incur debt against your home, and both affect equity, but they do so in different ways. Traditional home mortgages require making monthly payments to a lender. With a Reverse Mortgage, payments are made to you.

What a Reverse Mortgage Involves

Here are some important points to know when considering a reverse mortgage:

Eligibility: To qualify for a reverse mortgage, you must be at least 62 years of age. All owners who are on the title deed must meet this age requirement. You must also have paid off all, or most, of your home mortgage. Lastly, the home you reside in must remain your principal place of residence.

Mandatory Counsel: To receive a reverse mortgage, federal law requires that you first undergo counseling to understand how these mortgages work. This ensures you will make the right decision when it comes to choosing a plan. Also, the counseling service must be provided free of charge.

Tax-Free Income: One of the advantages of a reverse mortgage is that the money you receive will not be taxed. The amount you’ll obtain depends on several factors including the plan you select, the type of cash advances you choose, your age, and the value of your home. Typically, the older you are the larger the loan, as you will have more equity in the house.

Cost: The cost of a reverse mortgage varies considerably from one type to the next. However, you can typically use the money you receive to offset the loan fees. The costs will be added to the loan balance and must be repaid with interest once the loan terminates.

Repayment: Reverse mortgages do not require any payment as long as the borrower(s) remain in the home. Should the borrower(s) pass away, sell the home, or permanently relocate, then the loan would be due in full, along with interest and additional costs. If two borrowers are on the loan and one dies, the loan would not be due since one of them still occupies the home.

Home Equity Conversion Mortgage – The Federally Insured Loan

The most common type of reverse mortgage is the Home Equity Conversion Mortgage, otherwise known as a HECM mortgage. This is the only reverse mortgage program that’s federally insured and backed by the U. S. Department of Housing and Urban Development (HUD). This type of reverse mortgage is popular for a few reasons:

• Ability to choose your own interest rate. You can select one that changes annually or one that changes every month.
• You have several payment options. You may receive monthly loan advances for a fixed term or for as long as you live in the home. You may also choose to receive a line of credit or combine monthly loan advances with a line of credit.
• The loan can be used for any purpose. With a HECM, you don’t have to designate the loan to a specific use; you can apply the funds to anything you choose.
• Protection. This is one of the most attractive features of a HECM. This plan protects you by guaranteeing continued loan advances even if your lender defaults.

Sell or Stay?

The main reason people choose a reverse mortgage is to gain financial independence and maintain an adequate standard of living without leaving their current home. The best way to decide if a reverse mortgage is right for you is to compare it to the other option of selling your house. To do this, ask yourself these three questions:

1. How much cash can I get by selling my home?
2. How much will it cost to buy or rent a new place?
3. Is it worth my moving now, or do I prefer to do something else with the money?

Perhaps you’ll confirm what you knew all along, where you now live is the best place to be.

Contact me today if you have any questions.

Chairman Alan Greenspan of the Federal Reserve raised the federal funds rate by .25% to 3.5% yesterday. As a direct effect, commercial banks boosted their PRIME RATES (used for Home Equity Lines of Credit) by a .25% to 6.50%.