What Is a Reverse Mortgage and Is It a Good Idea?

Reverse Mortgage

There are a lot of opinions on the wisdom of using a reverse mortgage. Some people believe it is the best thing to happen to an older person’s finances. Others stress the pitfalls and dangers of this type of home loan.

The reality is somewhere in the middle. A reverse mortgage can be an excellent option for many homeowners. But it does carry unique rules and risks that people need to pay attention to before signing on the dotted line.

At TwinCity Lending, we take care of seniors with the respect and dignity they deserve. We will not steer you toward a home loan package that isn’t the right fit for you. But if a reverse mortgage is appropriate, we can help.

What Is a Reverse Mortgage?

A reverse mortgage is a home loan that works the opposite way of a traditional forward mortgage. In this type of loan, the home serves as collateral, just as it does in a forward home loan. But most other components of the mortgage work in reverse.

With a reverse mortgage, the homeowner borrows against the property’s equity. The lender makes payments to the homeowner instead of the other way around in this scenario. In essence, the borrower can convert their home equity into a significant amount of cash.

Seniors who qualify and choose to take out a reverse mortgage often use the cash to supplement their retirement income. Depending on the type of loan package, there may be stipulations on how the borrower uses the funds.

Home Loan for Seniors

What Happens to a Reverse Mortgage If the Homeowner Dies?

Many concerns about reverse mortgages center on what happens when the homeowner passes away, moves, or sells the home. But protections are in place for this situation. 

Lenders cannot offer a loan for more than the value of the home. Additionally, if the home’s value drops, making the loan balance larger than the home value, the borrower is not responsible for the difference. The borrower’s estate also will not need to repay that difference.

The loan is due in full when any of these events take place:

  • The borrower passes away.
  • The borrower sells the house.
  • The borrower moves out of the home for more than a year. This situation can happen in cases where the homeowner needs to go into nursing care.

Typically, the heirs or the estate sell the home to repay the loan. In some instances, the estate or heirs may choose to pay back the loan and retain the property.

Three Types of Reverse Mortgages

For those considering taking out a reverse mortgage, it’s essential to understand the options.

 

  • Single-Purpose Reverse Mortgage: This option is generally the least expensive loan choice. But it also is the most restrictive one. Single-purpose reverse mortgages are available through particular government and non-profit agencies. The loan paperwork specifies what the funds are for, and that is the only way the homeowner can use the loan money.
  • Proprietary Reverse Mortgage: This loan option is a rarely-used reverse mortgage. It is only available to borrowers with much higher home values than what a typical reverse mortgage allows. Although you may be able to borrow more money, you are likely to have a higher interest rate, as well.
  • Home Equity Conversion Mortgage (HECM): The HECM is by far the most common form of a reverse mortgage. This version does not have income or medical requirements. HECM loans have backing from the U.S. Department of Housing and Urban Development. Because of this fact, borrowers must go through a mandatory counseling session before proceeding with the loan. The homeowner pays for the counseling appointment.

 

Who Qualifies for a Reverse Mortgage?

This type of home loan is not as widely available as a traditional mortgage. There are specific requirements for qualification, and several of them relate to the home, not the borrower.

  1. You must be at least 62 years old and live in the home.
  2. The home must have sufficient equity, as determined by the lender.
  3. The property must be a single-family home. Two-, three-, and four-unit properties also may qualify if the borrower lives in one of the units.
  4. You must have enough income to cover home maintenance and other costs, such as insurance, taxes, and HOA fees.
  5. For HECM options, you will need to undergo the required HUD counseling session.

Is a Reverse Mortgage a Good Idea?

More than a million seniors have secured reverse mortgages since they became available in 1990. This loan option has allowed many homeowners to remain in their houses in spite of fixed retirement incomes. As with any home loan package, there are benefits and downsides to consider.

One of the greatest benefits to a reverse mortgage is the ability to remain in your home while freeing up money for expenses. Homeowners who have significant equity can supplement their income this way, allowing them to live a fuller life in retirement. Since there are no income or medical restrictions for obtaining an HECM, the reverse mortgage can be simple to get.

Many seniors like the idea of having additional income during their golden years. They appreciate controlling their money without having to rely on children or other family members for assistance. And as many people seek ways to age in place, the reverse mortgage is gaining popularity.

Those who qualify can receive their reverse mortgage funds in several ways:

  • Lump-Sum Payment: This distribution is the only one with a fixed interest rate and typically has a cap of 60% of your equity. 
  • Equal Monthly Payments: These payments can last the life of the loan or for a set amount of time, depending on loan terms.
  • Line of Credit: Seniors can draw against their equity and are only responsible for repaying the amount they draw.

Let’s Talk

Cash From Equity

If you or a loved one are considering a reverse mortgage, reach out to the experts at TwinCity Lending. We will thoroughly explain the ups and downs of this type of home loan to be sure you are set up for success. There are many scams out there, and we want to be sure you have protection.

It is our honor to serve the seniors in our community who have already contributed so much. Give us a call today to see if a reverse mortgage is right for you.

What Is a VA Home Loan Certificate of Eligibility?

United States Veterans

When it comes to home loans, the VA program is one of the most popular programs on the market. And rightly so, in our opinion here at TwinCity Lending. But many veterans aren’t sure how to start the process of securing a VA mortgage. It may feel overwhelming to get started, but the first step is to obtain your VA home loan certificate of eligibility.

This vital document also called a COE, is where your VA lending process begins. The VA loan eligibility letter tells the lender that you can receive home loan funding through this unique program.

The team at TwinCity Lending is proud to serve our nation’s active and veteran military members. It is an honor to help you secure a home loan so that you can enjoy the many benefits of the American Dream.

What Is a VA Home Loan?

Before getting too far into your eligibility journey, let’s clarify what a VA home loan is and how it works. This program has been vital in the stability of our nation.

VA Home Loan

The United States Department of Veterans Affairs oversees the VA home loan program. Passed in 1944 as part of the Servicemen’s Readjustment Act, the VA home loan provides backing for mortgages for those who serve in the military.

The Department of Veterans Affairs does not extend the loan for a home purchase. Instead, it guarantees the loan so that a lender has less risk in making it. Many service people leave the military without a credit history. And obviously, someone who is actively serving or recently discharged doesn’t have a traditional job history either.

With traditional home loans, these two factors would be stumbling blocks. Lenders would see this sort of borrower as too big of a risk. The VA-backed loan, however, provides partial repayment of the mortgage if the borrower cannot pay. This minimizes the risk that a lender must take.

In addition to backing the loan, the VA program also offers:

  • Low or zero-down payment requirements
  • Lower credit score requirements
  • More lenient income requirements

Those who qualify can use the VA home loan option to purchase a condo, mobile home, or single-family dwelling for their primary residence. It also allows borrowers to secure a loan to build or refinance their primary residence. It is not available to use for second homes or investment properties.

A home loan through the VA provides an incredible opportunity for military members and their families. It is a well-earned benefit for their service.

How Do I Get a VA Home Loan Certificate of Eligibility?

To secure your crucial COE, you will have to verify that you are eligible for the loan. There are specific requirements based on when you served, whether it was during war or peace, and how long you served. The reason for your separation from the military is also a factor.

Once you know that you are eligible for the program, you need to obtain the VA loan eligibility letter. To secure your certificate of eligibility, you can apply online through the Department of Veterans Affairs website. You can also apply by mail, although this takes more time.

As soon as your document arrives, you are ready to work with a lender to secure a home loan. The COE will work for any lender who offers VA mortgage options. Take the time to choose a lender you trust and who will answer all your questions. Many veterans opt to work with a mortgage broker such as TwinCity Lending to receive the best service, selection, and interest rates.

What Is the Process for Getting a VA Home Loan?

Military Family

When you have your COE in hand, obtaining your home loan will look much like it does for anyone else. Once you have chosen a lender or broker, the process is generally quite simple. It typically breaks down into five steps.

1. Get a Pre-approval Letter from Your Lender

Whoever you choose to work with for your VA home loan will generate a letter of pre-approval. This letter tells you and your real estate agent how much you can spend on a home. Once you are ready to make an offer on a property, this letter is crucial. It shows the seller that you are prepared to move forward right away. Buyers without this letter have a harder time entering into a contract.

2. Find Your Perfect Home

Work with an experienced realtor to find the right house for you and your family. Unless you have a critical time frame to work within, you don’t need to rush. Buying a home is one of the most significant investments you will make, so go ahead and take the time you need. 

3. Enter into Contract on a Property

Your real estate agent will help you make an offer once you find the home you want. If the seller accepts, then you are under contract to buy the house. Congratulations! This step is when your VA home loan lender will kick into high gear. There will be an appraisal and inspection, and you will likely need to provide more documentation to the lender. 

4. Close the Transaction

At TwinCity Lending, once we have all your documents, we typically can close on your home loan within two weeks. Assuming nothing significant shows up in the inspection and appraisal process, this is a relatively speedy part of buying a home. When you and the seller have signed everything, the paperwork will go into the county records. At that point, you will have the keys to your new home.

5. Move into Your New Home

VA Home Loan for Military

Now it’s time to enjoy this well-deserved reward of homeownership. You served with bravery and honor, and now you can cherish a home of your own. Thank you for your service.

Connect with a Premier Mortgage Broker

TwinCity Lending offers personalized concierge service to all of our clients. And it is an honor to serve those who have served our nation.

Reach out today with any questions about the VA home loan process. Our expert team will help you on your road to buying your very own home.

5 Reasons Minneapolis is One of the Most Fit Cities in the Country

Mountain Biking

There has been an increasing focus on being fit and taking care of yourself in recent years. People across America are more aware of how important the body is and work hard to take care of themselves. Minneapolis is no exception and is one of the most fit cities in the country.

If you are thinking about moving to a city that embraces fitness, Minneapolis is the perfect place. And if you are looking for a home loan in Minneapolis, we are here to help.

At TwinCity Lending, we strive to make purchasing your own home simple and even enjoyable. Contact us today and see how we can help you achieve your dream of homeownership.

As you consider making Minneapolis your home, let’s take a look at all the city has to offer.

Pedestrian-friendly town

1. Bike and Pedestrian Friendly

If you prefer walking or biking around town rather than driving, Minneapolis is the city for you. Minneapolis consistently ranked as one of the friendliest cities to bikers for multiple years. You will find countless paths for bikes throughout the city, along with neighborhoods designed for easy access without vehicles.

Some of the best bike paths in the city are the Midtown Greenway, Chain of Lakes, and the Minneapolis River Parkways. The Midtown Greenway sits in the southern region of Minneapolis along a railroad corridor. This safe path is 5.5 miles long and has year-round maintenance. It also joins with many other trails for ease of access.

One of the nicknames for Minneapolis is the City of Lakes. What better way to experience this than on the Chain of Lakes trail? Take in views of Brownie Lake, Cedar Lake, Lake of the Isles, and more. You will always find new sights on this 15-mile route.

The Minneapolis River Parkway is actually two different parkways. The East and West sections are on either side of the Mississippi River. There is no word on whether or not a wicked witch resides in either location. On this path, you will experience the sights of the Twin Cities, including the Stone Arch Bridge and the skyline.

In addition to being bike-friendly, many Minneapolis neighborhoods have high walkability scores. You’re sure to find a community where you can walk to morning yoga or to meet friends at a local bar.

2. Parks Galore

Minneapolis and the Greater Twin Cities are home to some fantastic parks. Whatever area of the city you live in will offer wonderful parks for you and your family. If you live in Minnesota, you know there is no shortage of natural beauty. The parks in Minneapolis are no exception.

Loring Park is in the central area of Minneapolis. Not only is Loring Park incredibly beautiful, but it is also easily accessible and very connected to other attractions in the city. The park itself covers 34 acres and is full of areas for cyclists and pedestrians. It offers numerous athletic courts, as well.

Minneapolis Lakes

Lake Harriet is an amazingly beautiful park located on the southwest side of Minneapolis. Along with the open spaces for enjoying a leisurely afternoon, the park boasts live music and movies throughout the year. For a fun afternoon activity, write a letter to leave at the elf house.

3. Covered Walkways

It comes as no surprise that there are months when the citizens of Minneapolis avoid being outdoors as much as possible. When the temperatures drop, the wind picks up, and the snow falls, a sheltered way to get around town is definitely a plus.

Thankfully, Minneapolis is ready. The Minneapolis Skyway System is impressive in its own right. You will stay warm and dry as you navigate the 9.5 miles of enclosed paths that cover an astounding 80 city blocks. Enjoy walking through downtown Minneapolis in comfort.

The cold winter weather won’t force you to stay cooped up at home. You will be able to stretch your legs and enjoy everything Minneapolis has to offer, no matter the weather.

You can hit the gym, do a little shopping, stop by the bank, and run all of your errands in the covered Skyway System. While you’re out, go ahead and grab a bite to eat, get a pedicure, and pick up a bottle of your favorite wine for the evening.

If you are looking for entertainment, you can even visit three different sports facilities as well as theatres and art galleries. Snow won’t keep you from getting to a show or a Vikings game when you live in Minneapolis.

4. Healthy Food

Farmers Market

If you are looking for a city that makes it easy to eat healthily and stay fit, you will find everything you need in Minneapolis.

A fantastic place to start is the Minneapolis Farmers Market. With multiple locations, days, and plenty of hours to shop, you will be able to get fresh and local food when you need it. Even when fresh produce is out of season, you will find fresh eggs, meat, and cheese, as well as crafts and homemade items.

What better way to support local growers and businesses than shopping at a farmers market? You will love the variety of local items you can find perusing the booths at any of the Minneapolis Farmers Markets. Jump right into the Minneapolis ethos and community at these events.

5. Healthy People

Minneapolis is full of people who value their health and wellness. Residents know how essential fitness is for living an enjoyable life, so you will have a built-in community to support your healthy lifestyle.

It is easy to stay fit in Minneapolis. Local restaurants offer healthy dining options. Gyms and yoga studios make it easy to exercise regardless of how Mother Nature behaves. And mental health centers provide support for those who need it.

Call TwinCity Lending

If all of this sounds too good to miss, call TwinCity Lending today. We will walk you through the process of getting a loan so you can begin your life in Minneapolis, one of the most fit cities in the country. Join a community of people who enjoy living a healthy life and know that the Twin Cities is the place to do it.

Can I Get an FHA Home Loan With Bad Credit?

Get An FHA Home Loan

Having bad credit doesn’t always have to stop you from buying a home. If you have a steady income that allows you to make a monthly mortgage payment, you may be able to get an FHA home loan even with bad credit.

There are several pieces of your financial health that a lender will look at, but there are options for those with credit challenges. Working with a mortgage broker is the best choice for finding a home loan package that will work for you.

At TwinCity Lending, you can learn how to get a home loan from our lending specialists. Contact us to learn more about the options we offer.

Will an FHA Home Loan Help You Buy a Home?

The Federal Housing Administration (FHA) provides financial backing to qualified consumers. The FHA is not the lender for your home loan. Instead, they insure the loan so that lenders are willing to extend credit to borrowers who don’t qualify for traditional mortgages.

This program offers potential buyers the chance to secure a home loan even if they do not have a high credit score or a large down payment.

Credit Score for Home Loans

A conventional mortgage typically requires a buyer to have up to a 20 percent down payment to purchase the property. It also generally demands credit scores of at least 700 to secure a home loan with the best interest rates. FHA loans are different.

The benefits of an FHA loan are numerous. They can include:

  • Lower interest rates on the home loan you secure
  • Reduced closing costs
  • Lower down payment requirements
  • Improved access to credit with lower application requirements
  • The ability to purchase a more expensive home due to the lower interest rate

Every situation is different. Even if you have bad credit, you may qualify for an FHA loan so that you can enjoy the benefits of homeownership.

What Are the Eligibility Requirements for an FHA Loan?

There are a few things you need to know about how to get an FHA home loan. Not everyone with bad credit will qualify. Those who wish to buy a house using this type of loan still need to provide proof of income to show they can make a consistent monthly payment.

To obtain an FHA loan, you must have a minimum credit score of 500. If your number is higher than this, you may qualify for additional savings opportunities. If you have a credit score of at least 500, you may be eligible to borrow up to 90 percent of the home’s sale price. This opportunity means you would need to provide only 10 percent as a down payment.

Some borrowers who have a score of at least 580 may benefit for additional financing opportunities. Your down payment requirement drops to just 3.5 percent at that point.

In addition to credit score expectations, other requirements exist. You will need to show:

  • Proof of consistent, adequate income
  • A debt-to-income ratio that is within the lender’s range
  • Proof that the property is in good enough shape to qualify

Your TwinCity broker will help you learn if you’re eligible to get a home loan using the FHA program. We can answer all of your questions about the requirements.

What If Your Credit Score Isn’t That High?

As noted, FHA does not provide home loans. Traditional lenders do. That means you still must meet the lender’s standards for borrowing money.

The FHA backing offers protection to the lender since it is riskier to provide a loan to someone with poor credit. Should you default on the loan, the FHA will pay the lender for their losses. Thanks to that financial protection, the lender is willing to extend you a mortgage at a reasonable interest rate.

If your credit score is lower than 500, the FHA may not be willing to approve your loan application. That means lenders would face a significant risk. This risk will likely mean they will not offer you a home loan. If you have a sub-500 credit number, consider following these tips for improving your credit score before you try to secure a mortgage.

Pay Down Your Debts

Get Rid of Debt

Instead of using credit, make purchases with a debit card or cash. Focus on paying down or eliminating consumer debt to lower your debt-to-income ratio. This ratio is a significant piece of the lending picture. If you have too much debt compared to your income, a lender will not risk extending you a loan. 

Check Your Credit Report

You can get a free copy of your credit report every year from each of the three credit bureaus. Take advantage of this service and check that everything on your credit report is up-to-date and accurate. Errors will lower your credit score, so address them quickly. 

Make On-Time Payments

One of the most significant impacts on your credit score is your ability to make payments on time. Use auto-pay features with your utilities and credit card companies to make sure the payments are never late.

Avoid Opening New Lines of Credit

When you are preparing to seek an FHA home loan, or any mortgage option, don’t open new lines of credit, such as new credit cards. Even if a new credit card has a zero balance, it raises a red flag to lenders. It is potential debt, and it gives them pause.

Consider Debt Consolidation

There are no legitimate companies that can repair your credit for you. Instead, ask your lender if there are options for consolidating your debt to pay it down faster. You might want to seek help from consumer credit bureaus as well. And once you do secure an FHA home loan, the TwinCity experts can explain how to use your home equity for debt consolidation when the time is right.

Ready to Apply for an FHA Loan?

Make a Budget

As you work with a lender to determine if you qualify for an FHA home loan, continue to make all the right financial moves:

  • Build up your down payment.
  • Create a budget and stick to it.
  • Pay down your debt.
  • Consider adding new income, if possible, to help boost your ability to qualify.

If you want to learn how to get an FHA loan or to learn about applying for any home loan, contact TwinCity Lending. Our team can help you to find a mortgage package that will work for you, even if you have less-than-perfect credit. Reach out today to schedule a no-obligation consultation with our team.