by First Integrity Team Supreme Lending | Feb 10, 2025
A reverse mortgage* is a unique loan designed to help eligible homeowners and homebuyers aged 62 or older convert some of their home equity into cash. This program may offer greater flexibility and financial independence, especially for those entering retirement. Reverse mortgages allow qualified senior homeowners to tap into their home’s value to meet other financial needs without having to sell their property or make monthly mortgage payments. What is a reverse mortgage, how does it work, and who may benefit from one? Here’s a breakdown.
What Is a Reverse Mortgage?
Reverse mortgages allow homeowners to borrow money using their home as security for the loan. Unlike traditional home loans where the borrower makes monthly payments to the lender, with a reverse mortgage, the lender makes payments to the homeowner. Reverse mortgages are experiencing a surge in popularity as more retirees may be considering them to supplement their retirement income.
How It Works?
The funds received with a reverse mortgage are based on the equity that’s been built in the home. Payments can be made to the homeowner in several ways:
- A lump sum
- A line of credit
- Fixed monthly payments
- A combination of all three options outlined above
The loan does not have to be repaid until the borrower sells or no longer lives in the home. However, the borrower must still meet all loan obligations including living in the house as a primary residence, keeping up with all property payments such as insurance and taxes, and maintaining the home’s condition.
What Can Reverse Mortgage Funds Be Used For?
A reverse mortgage may be a way for seniors to turn their home’s equity into cash to meet their financial needs while maintaining ownership of the property. The funds may serve various purposes, such as paying off other existing mortgages; covering healthcare, taxes, or insurance expenses; funding home renovations; and serving as a safety net for unexpected emergencies.
It may be an ideal option for seniors who:
- Want to stay in their home long-term.
- Need additional income to maintain their quality of life during retirement.
- Have significant equity built in their property but don’t want to sell or cash-out refinance** and take on monthly mortgage payments.
- Need to pay for in-house healthcare.
- Get a later in life silver divorce but want to stay in their home.
- Want to buy a home but are unable to pay all cash.
Frequently Asked Questions About Reverse Mortgage
1. Do I still own my home with a reverse mortgage?
Yes. When you obtain a reverse mortgage, you still retain ownership of your home. Your name remains on the title and the home is yours—just as it would be with any mortgage. You’re still responsible for paying property taxes, homeowners insurance, and maintaining the home.
2. When does the mortgage need to be repaid?
Once you no longer live in the home as your primary residence, the loan balance, including interest and fees, must be repaid. This is usually done by the homeowner or their estate that is selling the house
3. Will I owe more than my home is worth or leave my heirs with debt?
No. A HECM (Home Equity Conversion Mortgage) reverse mortgage is insured by the Federal Housing Administration. This insurance feature guarantees that you will never owe more than the value of your home when the loan becomes due. No debt will be left to your heirs. And if the loan balance is less than the market value of the home, the additional equity is retained by the homeowner or heirs if the home is sold.
4. What types of homes qualify for a reverse mortgage?
Single-family homes, FHA-approved condos, and multi-family homes (up to four units) are typically eligible, as long as the property is the borrower’s primary residence.
*A reverse mortgage increases the principal mortgage loan amount and decreases home equity (it is a negative amortization loan). When the loan is due and payable, some or all of the equity in the property no longer belongs to borrowers, who may need to sell the home or otherwise repay the loan with interest from other proceeds. Lender charges an origination fee, closing costs and servicing fees (added to the balance of the loan). Monthly service fees are not assessed in Texas. The balance of the loan grows over time and Lender charges interest on the balance. The borrower must meet all loan obligations, including living in the property as the principal residence and paying property charges, including property taxes, fees, hazard insurance. The borrower must maintain the home according to FHA requirements. Failure to meet these requirements can trigger a loan default that may result in foreclosure. This material has not been reviewed, approved or issued by HUD, FHA or any government agency. The company is not affiliated with or acting on behalf of or at the direction of HUD/FHA or any other government agency
**By refinancing an existing loan, total finance charges may be higher over the life of the loan.
by First Integrity Team Supreme Lending | Feb 10, 2025
Whether currently married homeowners or soon-to-be married, it’s important to understand the homeownership rights when it comes to spouses and the state they reside in. Let’s breakdown spousal states versus community property states and how they impact the mortgage process for married couples.
Spousal States
In spousal states, which includes 41 states and the District of Columbia, common law property is used to determine homeownership of married couples. This means, if only one member of the married couple buys a home or acquires a property, it belongs solely to that person unless the property is specifically put in the names of both spouses.
However, when purchasing or refinancing a home, the other spouse who is not involved in the mortgage will still need to sign various legal closing documents to acknowledge they know about the loan but are not financially responsible for it. In the event of a divorce under these circumstances in a spousal state, the marital property would be divided in a way that is fair but not necessarily equal 50-50, which is called equitable distribution.
For the other spouse to be added to the mortgage and gain ownership rights, they will typically need to refinance.
Community Property States
When a married couple buys a new home or refinances in a community property state, both spouses are financially responsible for the mortgage, even if an individual isn’t listed on the loan. Therefore, both parties will need to be involved in the loan closing. These states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.
Community property states allow a 50-50 split of homeownership for marital property and assets, including debt. This means one spouse’s debt may impact the Debt-to-Income (DTI) ratio when applying for a mortgage together.
To learn more about mortgages for married couples or other home financing information, contact your local Supreme Lending branch or connect with us today.
by First Integrity Team Supreme Lending | Feb 1, 2025
What’s an Appraisal?
For those who have never been through the mortgage process before, an appraisal refers to an unbiased estimate of a home’s value. A professional appraiser evaluates the property to confirm its worth, which is then used to determine how much money can be loaned to the borrower through a mortgage.
In nearly all home purchases today, lenders require an appraisal before approving a loan. This is because they want to be confident that they’re not loaning more money than the property is worth, as this would put them at risk of loss if the borrower defaults on the loan.
Generally, appraisals are completed and filed within the jurisdiction in which the property is located. This is important to keep in mind if you’re considering a purchase in another city, county, or state, as different jurisdictions have different requirements and processes.
Why Are Appraisals Important?
As mentioned, appraisals play a vital role in the homebuying process as they provide an unbiased estimate of a property’s value. This number becomes incredibly important when negotiating a purchase price, as it can help confirm or refute the asking price set by the seller.
If you’re planning to obtain a mortgage to finance your home purchase, the appraisal value will also be used to determine how much funds you’re eligible to borrow. In some cases, the appraised value may be lower than the agreed-upon purchase price, meaning that the buyer would need to come up with the difference in cost.
Of course, it’s important to remember that appraisals may not always be 100% accurate. There is some subjectivity involved in the process, and different appraisers can sometimes come up with different values for the same property. That’s why it’s important for buyers to be aware of recent comparable sales in the area, as this can help them gauge whether or not an appraisal is fair.
What Do Appraisers Look for?
When an appraiser is assessing a property, they’ll be looking at several different things. Here’s a general list:
- Interior and exterior inspection: The appraiser will visit the property and conduct a thorough inspection, taking note of both the condition of the property and any features or amenities that may impact its value. This will cover both the interior and exterior of the property.
- Review of recent sales: The appraiser will also review recent sales of comparable properties in the area to get an idea of the current market value. These will be included in the appraisal report for review, along with a street map that shows the locations of those properties.
- Assessment of the property’s condition: The appraiser will also provide their opinion on the condition of the property, which can impact its value. Therefore, it’s important for sellers to make necessary repairs or improvements before putting their home on the market.
- Square footage calculation explained: Assessing square footage is another essential part of the appraisal process. The appraiser will determine the total square footage of the property as well as the livable space. This can sometimes be tricky, as there are different ways to measure square footage and some methods may result in a larger number than others. For this reason, appraisers are generally required to also include the method they used in determining the home’s square footage on the report.
- Photos: One of the most important parts of the appraisal report is the photos that the appraiser takes during their inspection. These provide a visual record of the property’s condition and can be helpful when reviewing the report.
The appraiser’s findings are presented in reports that typically are several pages and include other important information, such as the appraiser’s qualifications, contact information, and any licenses or certifications they may have.
Who Pays for Appraisal Costs?
Generally speaking, appraisals can run between $300-$700 for single-family homes, though the exact cost will depend on the appraiser and the property being assessed. In most cases, the buyer is responsible for covering the cost of the appraisal, though there are some instances where the seller may agree to pay. Homebuyers may have the option to roll the appraisal cost into their closing costs or possibly the mortgage itself.
For more information on the appraisal process, or to learn more about any of our mortgage products and services, contact your local Supreme Lending team today.
Related Articles:
by First Integrity Team Supreme Lending | Jan 31, 2025
Military veterans and active-duty service members have dedicated their lives to serving our country, and Supreme Lending couldn’t be more grateful for their service. When it comes to homeownership, there’s no one more deserving than those who risk their lives to protect our freedom and safety. Supreme Lending is proud to offer the VA loan program. Backed by the U.S. Department of Veterans Affairs (VA), VA loans are designed to give eligible borrowers valuable home financing benefits, including no down payment requirement.
In this article, we’ll explore VA loans, eligibility, and, more specifically, the VA loan funding fee and how it works.
What Is A VA Loan?
A VA loan is a mortgage backed by the U.S. Department of Veterans Affairs. VA financing helps miliary veterans, active-duty service members, and certain members of the National Guard and Reserves become homebuyers. These loans offer several advantages, such as:
- No Down Payment Requirement. One of the biggest benefits of VA loans is that they allow you to purchase a home without a down payment. This makes homeownership for eligible military families more accessible with less upfront costs.
- Competitive Rates. VA loans often come with lower rates compared to Conventional loans, which may save money in interest over the life of the loan.
- No Private Mortgage Insurance. Unlike many Conventional loans that require Private Mortgage Insurance (PMI) when you put less than 20% down, VA loans don’t require this added cost.
- Repeat Buyers. Another unique benefit of VA financing is that it is not only for first-time homebuyers. Repeat buyers are accepted and second homes may be eligible under certain circumstances.
- Low VA Loan Funding Fee. The one-time VA loan funding fee is greatly lower than the typical down payment requirements. Below, we will outline the various funding fee percentages depending on the situation.
- Exemptions for Eligible Borrowers Available. There is an option to be exempt from paying the funding fee for qualified borrowers. For example, veterans who receive compensation for a disability related to their miliary service or active-duty members who received the Purple Heart.
Who Is Eligible for a VA Loan?
To qualify for a VA loan, you must meet specific eligibility guidelines. Generally, you must be a veteran, active-duty service member, or a member of the National Guard or Reserves. When applying for a VA loan, you must have a valid Certificate of Eligibility (COE). This demonstrates your service record and entitlement to VA loan benefits. Some surviving spouses of veterans may also qualify under certain circumstances.
What Is a VA Loan Funding Fee?
While VA loans offer incredible benefits, there is an important cost borrowers need to keep in mind: the VA loan funding fee. The fee helps to lower the cost of the loan for U.S. taxpayers since the VA home loan program doesn’t require down payments or monthly mortgage insurance.
Funding Fee Amounts
The amount of the funding fee varies based on the borrower, type of VA loan they’re getting, and how much down payment is being paid. First-time borrowers typically pay a lower funding fee compared to those who have previously used a VA loan
Click here for a breakdown of funding fees based on loan type.
Paying the Funding Fee
The VA funding fee is paid at closing. There are a few ways you may choose to pay the fee:
- Upfront Payment. Borrowers may pay the fee at closing, in full, which can be included as a closing cost.
- Finance Fee. Borrowers may also choose to roll the funding fee into their loan amount, allowing them to pay it over the life of the mortgage instead of upfront.
- Seller Concessions. In some cases, the seller may agree to cover the funding fee as part of the purchase agreement, providing additional assistance to the buyer.
Explore VA Loans from Supreme Lending
VA loans are a wonderful resource for military veterans and active-duty personnel looking to achieve homeownership. While there’s no down payment requirement, it’s essential to understand the VA loan funding fee. If you’re considering a VA loan or want to learn more about your home financing options, contact your local Supreme Lending branch today!
Related Articles:
by First Integrity Team Supreme Lending | Jan 25, 2025
Your Helpful Guide to Mortgage Homebuying Tips
Buying a home is one of life’s biggest milestones—a place to make lasting memories, build your future, and truly create a place to call your own. But let’s face it: the homebuying process can feel a bit overwhelming at first. But with the right preparation and guidance, you can navigate your mortgage smoothly and confidently. Whether you’re just thinking about purchasing a new home, buying for the very first time, or a seasoned pro, these 10 mortgage homebuying tips will help you make sense of the process and set you up for success.
1. Save for a Down Payment Early
One of the most important mortgage homebuying tips is saving for a down payment. While some loans may require as low as 3-5% down, the more you have saved, the better. A larger down payment also means a lower loan amount and reduced monthly payment. Working with your local lender early on in the process can help you plan for how much to save for.
2. Don’t Wait to Get Pre-Qualified
Before you even start house hunting, the first step in the homebuying process is getting pre-qualified for a mortgage. Pre-qualification gives you an initial idea of how much you may be able to afford based on information you provide to your lender, including your assets, income, and credit score. Getting a mortgage pre-qualification or pre-approval can also show sellers that you’re a serious, capable buyer.
3. Compare Loan Types
Not all mortgages are the same, so it’s important to understand your options so that you can make an informed decision when it comes to financing your home. Whether it’s a Conventional, FHA, VA, or USDA loan, each comes with its own set of guidelines and down payment requirements. There are also several alternative financing programs including a jumbo loan, bank statement loan, and investment property loans.
4. Explore Down Payment Assistance Programs
Do you know about down payment assistance programs that may be available? These programs are designed to help more people become homeowners with affordable options and flexible guidelines. Depending on the program, assistance can be offered through grants, forgivable loans, deferred payment, or tax credits. Don’t hesitate to ask your lender about these potential opportunities, as they may make a big difference in your homebuying journey.
5. Have Your Documentation Ready
When it comes time to apply for your mortgage, you’ll need to provide a variety of documentation so that your lender can verify your income, employment, and creditworthiness. Common documents include pay stubs, tax returns, bank statements, and W-2s. Having these ready may help speed up the process and avoid delays.
6. Know What’s Included in Your Loan Estimate
After you apply for a mortgage, you’ll receive a Loan Estimate (LE). This document provides you with important information regarding your mortgage application, including the estimated principle payment, interest, taxes, and insurance—also known as your mortgage PITI.
7. Prioritize Both an Appraisal and Home Inspection
During the mortgage process, it’s crucial to understand the appraisal and home inspection—and why you should opt to do both. The appraisal is an assessment of the home’s value that most lenders require. This helps confirm that the loan amount aligns with the property’s market value. Meanwhile, the home inspection evaluates the property’s condition and systems. A home inspector can identify any potential repairs or issues, such as roofing damages, electrical problems, or structural concerns.
8. Avoid Large Purchases or New Credit
It’s also important to hold off on making any large purchases or opening new lines of credit during the mortgage approval process. Big expenses like buying a car or furniture, or applying for a new credit card, may affect your credit score and debt-to-income (DTI) ratio. To keep your loan approval on track, avoid major financial moves until after you’ve closed on your new home.
9. Understand Costs Beyond the Down Payment
While the down payment is a big part of the homebuying process, don’t forget about the additional costs involved in securing a mortgage. Beyond the down payment, you’ll need to consider closing costs, which are other fees to process the loan that typically range from 2-6% of the loan amount. Another potential expense is mortgage insurance, which is required for FHA loans and if your down payment is less than 20% for Conventional.
10. Review the Closing Disclosure
Before officially closing on your home, you’ll receive a mortgage Closing Disclosure (CD). This document provides a transparent summary of all loan details, including terms, projected payments, closing costs, and a transaction summary. Lenders are required to provide your disclosure no later than three days before your scheduled closing. Be sure to carefully review all information to ensure it’s correct to avoid any potential delays.
Supreme Lending Is Here to Help
As you can see, the homebuying process has a lot of moving parts. Keeping these mortgage homebuying tips in mind will help ensure your loan experience is a smooth one.
At Supreme Lending, we’re here to guide you every step of the way. Want to learn more about our mortgage services or ready to start your homebuying journey? Contact your local branch today!
