Majority of borrowers who don’t want to make any upfront payments for closing costs look for no closing cost mortgage refinance loans at a time when interest rates are dropping. I mean check your refinance mortgage rates. Consumers always try to make the most of lower rates when it comes to refinancing their existing mortgages. In spite of the fact that the first time home buyers can also qualify for no closing cost mortgage loans, they’re more familiar in the refinancing market.

You should remember that no closing cost refinance doesn’t mean that you don’t have to spend anything for your closing costs. The only difference is that the closing costs are rolled into your monthly refinance loan payments and wouldn’t be charged as upfront payments. No closing cost refinancing is not that cheap in the long run. Rather than making upfront payments for the closing costs, you have to pay an interest rate that is 0.25%-0.5% higher to make up for the fees of the lender as well as any third party expenses the lenders assure that you don’t have to pay. There is nothing called free from the lender.

Types of no closing cost refinance loans

No closing cost refinance loans are available in the 3 following categories:

Zero lender charges but the borrower has to pay third party costs
Zero points but the third party fees and lenders fees are payable by the borrower
No up front cash payment, but the costs or fees are rolled into the interest rate of the loan

A good no cost refinance loan would carry similar interest rates like other loans and wouldn’t necessitate third party fees or lender fees. As expected, getting these loans is almost impossible.

Is no cost refinancing right for you?

No cost refinancing is most suitable for individuals who don’t have the cash available for making upfront payments on closing costs. It’s not a right option for people who want to live in their homes for a long time (over 5 years) and don’t want to refinance.

Where can you find a no cost refinance loan?

Currently, these loans are offered by various lenders. You can shop around online to find such a lender. You should explore lenders and compare their interest rates to avoid being ripped off. In addition, you should check out their performance history with the Better Business Bureau.

No cost mortgage refinancing is a familiar means to make the most of dropping interest rates. You should guarantee that you’re refinancing to a reduced rate and the closing costs are paid before the extra interest essentially begins to accumulate.

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Reverse mortgage loans:

Homeowners choose reverse mortgage loans due to various reasons according to a study by AARP, which includes payment of running mortgages to purchasing prescription drugs to living a quality life. However, payment for home care is the prime reason of borrowing a reverse mortgage for those who have already offered their power to attorney to others.

However, one should consider the fact that a reverse mortgage is not meant for everyone. Some people call it a loan of last resort. It has this name because it may be a good loan for people in their 60’s and 70’s. But it is definitely not suitable for someone who outlives the resource then has nothing to fall back on.

Therefore, you should have a solid reason for borrowing a reverse mortgage loan. Moreover, before borrowing you should ask yourself why you want to borrow. Also, you should carefully think of the purpose for which you need the money or in other words how you would use the money that you would get from reverse mortgage.

Reverse Mortgage Loans: How the loan amount is decided?

As far as the loan amount is concerned, it plays a vital role in a reverse mortgage loan. How this amount is decided is an important question. The amount of money that you can get as a home loan reverse mortgage depends on what program you have selected. There are different reverse home mortgage programs and so the one you choose can have influence on the amount of loan offered to you. The primary factor is your age. If you are older, you will get a higher loan amount than that a person younger than you would get.

Similarly, the value of your home by the appraiser is another factor that influences the loan amount. Similarly, FHA’s mortgage limit in your area is another influencing factor. Usually, the lower amount between the appraised value of your home and the FHA mortgage limit in your area is used to decide the loan amount to be offered to you.

Whether you are demanding the payment in bulk or payment in monthly installments, or any such combination, one thing that you must bear in mind is the fact that at one point the rising loan balance will be equal to the value of your home and there will be a cap called a non-recourse limit. It means that your total debt will be limited to the value of your home and you simply can’t expect anything more than the loan amount. And there is this recourse limit because of the fact that you simply can’t owe more than your worth and there can be no payment to be sought from the legal heirs.

Having said the above, on average you can expect to get up to approximately 70 percent of the appraised value of your home. But this amount may be including various expenses such as appraisal fee, origination cost, mortgage insurance premium, monthly service fee etc.

Therefore, reverse mortgages need to be understood thoroughly because there are many clauses and conditions attached with it. However, there are good facilities like online websites, toll free telephone numbers; HUD approved counseling agencies etc. that can help you to get all the required information. You can, however, also consult your real estate consultant or lending companies to get further information. However, the most important resource is the online calculator service offered free of cost by HUD and AARP through their respective website. Homeowners choose reverse mortgage loans due to various reasons according to a study by AARP, which includes payment of running mortgages to purchasing prescription drugs to living a quality life. However, payment for home care is the prime reason of borrowing a reverse mortgage for those who have already offered their power to attorney to others.However, one should consider the fact that a reverse mortgage is not meant for everyone. Some people call it a loan of last resort. It has this name because it may be a good loan for people in their 60’s and 70’s. But it is definitely not suitable for someone who outlives the resource then has nothing to fall back on.

Therefore, you should have a solid reason for borrowing a reverse mortgage loan. Moreover, before borrowing you should ask yourself why you want to borrow. Also, you should carefully think of the purpose for which you need the money or in other words how you would use the money that you would get from reverse mortgage.

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Things to do before borrowing reverse mortgage loans:

Reverse mortgages are gaining popularity day by day due to its unique value creation for senior homeowners. FHA created one of the first reverse mortgage loans, The Home Equity Conversion Mortgage (HECM), which is the only reverse mortgage insured by the Federal Government. The main objective of reverse mortgage loans is to give financial security to senior homeowners of 62 and above against their equity in their home, without their having to sell, rent or borrow another loan. Therefore, it is an important decision and so it is imperative that you know the top ten features of reverse mortgages.

I.            Know reverse mortgages:

Reverse mortgage is a type of loan which is offered to you on the basis of equity in your home. But unlike other loans or secondary mortgages, you do not need to pay back monthly till the time you use the house as your primary residence. You can also use HECM offered by FHA to purchase a primary residence if you pay the amount that may be required to purchase the new property, if it is over and above the HECM proceeds.

You have to return the loan to your lender, when either you don’t use the property as primary residence or sell your home. This payment shall include principal loan amount, interest charged and other costs.

II.       Who should borrow reverse mortgage loans?

Senior homeowners or those having equity in their home are eligible to borrow reverse mortgage. Its complete requirements are as follows:

• You must be at least 62 years old, 
• You own your home or at least have equity in your home.
• This house must be in use as your primary residence
• There is no income requirement.
• Exiting mortgage, if any, is not a problem but you should show that through reverse mortgage you will be sufficient to meet those mortgages.

III.      Should you get reverse mortgage when you did not buy your house with FHA mortgage insurance?

If you did not buy the house initially with FHA mortgage insurance, that’s fine.  This new FHA HECM shall be FHA-insured and so you don’t have to worry.

IV.       Is there any eligibility criteria for property to be reverse mortgaged?

In order to be eligible, your home should be either a single family home or a 1 to 4-unit property owned or at least a unit occupied by you. Similarly, condominiums and manufactured homes which are approved by FHA are also eligible. In addition, townhomes and detached homes are also eligible for reverse mortgage.

V.        Can you differentiate between reverse mortgage and a bank home equity loan?

You must know the difference between these two loans. If you are opting for a traditional second mortgage, or a home equity loan then in that case it is vital that you have a good income in connection to the debt. This is because you will be required to pay the mortgage payments every month. In case of a reverse mortgage loan this is not the case. You can get a reverse mortgage home loan in spite of your low income and you need not pay it off until this is your principal residence. The borrowed amount depends on your age, value of your home, rate of interest etc. It is better to get this loan when you are older and your home is quite valuable. Under such circumstances the rate of interest is normally lower. However, you are still required to pay the estate taxes, insurance and other bills.

VI. Is This Loan Required To Be Repaid?

You don’t have to repay this loan till the time you use the property as your primary residence. However, in case you stop using it as your primary residence or you sell this property, you have to clear the loan (covering the principal, the interest and the closing costs) first before using the money.

The reverse mortgage loan will be adjusted first (covering the principal, the interest and the closing costs) and the balance amount will be given to you or your heir.

VII. Will I still have anything To Inherit?

When you sell the home, you have to pay off the loan along with interest and other fees such as closing cost etc, to the lender. The balance amount, if anything remains after clearing the payments to the lender, is given to you or your heir.

VIII. How much money can I expect in reverse mortgage loans?

Like any other loan, the amount that you can borrow depends upon several factors such as age, the interest rate in the market, and lower amount between the value of your home and FHA’s mortgage limit for your region.

IX. Where Do I Get This information?

You can get complete information from FHA without any cost. You can also get this information at a nominal cost from HUD-approved counseling agencies which can also provide you with a free referral to a list of FHA approved lenders. You can also call FHA at their toll free number.

X. Payment Receivable Options

There are five types of payment options available in case of reverse mortgage and so you can you chose any option suited to your needs. These options are:

• Tenure
• Term
• Line of Credit
• Modified Tenure
• Modified Term

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Reverse mortgage loans: The best option?
If you are a senior homeowner of 62 or above and own the property that you are using as a primary residence or have an equity in it and are looking for a regular stream of income, the reverse mortgage is definitely the best option for you.

Also, if you are a homeowner without any source of income, you can’t create a new source of income at the age of 62 or more. In this case the maximum you can do to create a source of earning is either rent out or sell your house and shift to a cheaper dwelling. But either way, you will be deprived of your home. Therefore, reverse mortgage loans are tailored to suit the needs of senior homeowners because through reverse mortgage, they not only get a permanent source of income but also get stay in their home.

What are reverse mortgage Loans?
A reverse mortgage is a tool that converts your share in your home into a regular stream of income. It is a loan against your home or your equity in the home that you borrow without any need to repay this loan. In other words, you convert the value of your house to cash without moving out, renting or selling. It is called reverse mortgage because inspite of it being a loan, you do not need to pay anything, rather you get a monthly payment.

Reverse mortgage is becoming popular day by day among seniors who are either homeowners or have equity in home and want to create a source of income. Home Equity Conversion Mortgage (HECM) is the only reverse mortgage that is insured by the federal government. HECM is, however, available only through a network of FHA approved lenders.

Reverse mortgage Loan: How is it the best option for you?
There are several financial and non-financial benefits associated with reverse mortgage loans, that make it the best option for people of 62 or above who are either homeowners or have an equity in the house and are looking for a source of income. Few of the reasons that make it the best option for senior homeowners who are looking for any type of income/loan, are as follows:

Financial Benefits:
• There is no requirement of income or credit record
• Borrowers are not required to pay anything till the time they use the property as primary residence.
• The closing cost is financed

Property Requirements:
• There is no condition regarding type of property. Even single family homes with one unit used by the borrower are also accepted.

Choice of payment plans:
There several types of payment plans and you can chose whichever suits you:

• Tenure – In this case, equated monthly payment is made till the time at least one borrower lives and uses the property as a main residence.
• Term – equated monthly payment for a predecided number of months.
• Line of Credit – any time the payment is based on the timing and amount chosen by the borrower, till the time line of credit is finished.
• Modified Tenure – it is a mix of equated monthly payments and line of credit till the time borrower uses the home.
• Modified Term – it is a mix of equated monthly payments and line of credit for a pre-decided number of months, as chosen by the borrower.

Other factors:
• Homeowners are charged a nominal fee of $20 to restructure their payment plans.
• Borrowers are not required to make repayment till the time they use the home as primary residence in case of FHA-insured reverse mortgage.
• There are no criteria with reference to asset or income in order to meet requirements for the reverse mortgage.
• Similarly, there is no condition regarding the value of the house, in order to be eligible for a reverse mortgage.

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The VA mortgage loans are offered to eligible veterans and in-service military personnel through normal lending channels that include banks, lending institutions, and others. But the VA mortgage is secured by Veteran affairs which protects the loans against any kind of default by borrowers. Also, during the whole process the seller comes into the picture, similarly, appraiser, attorney, agents, etc have a role. Therefore, there are different people associated in closing the loan and hence the different steps to complete the process. Overall, there are five steps in order to complete VA mortgage borrowing. These steps are:

1. The veteran chooses a home and gets an agreement to sale signed by the seller, with the condition of successfully borrowing a VA mortgage.
2. Searches and shortlists a lender in order to apply for a loan along with all required documents including certificate of eligibility. If certificate of eligibility is not available, lender can get one through the online system. The veteran can then negotiate a VA mortgage rate and points towards the mortgage. However, the veteran can also negotiate VA mortgage rates even before making application. So, the application is filled with only the lender who commits the best VA mortgage rates.
3. The lender processes all information by using a VA approved underwriting system and gets a VA appraisal of the property done.
4. After receiving all information, documents, appraisal report, credit information etc., the lender underwrites the loan and finalizes a date for closing.
5. On the assigned date, the closing process take place in which a title company, attorney or their representative, seller, borrower etc. participate and coordinate the process of signing all documents and agreements etc., and finally, close the process.

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Bankruptcy itself is not a criterion of disqualification. However, it definitely leaves a negative impact. Even then bankruptcy does mean your application will be rejected for a VA mortgage. If bankruptcy proceeding was completed, then you can make application for a VA mortgage on the basis of the following conditions:

• Bankruptcy, if more than two years old, is usually disregarded.
• If the bankruptcy is of less than two years, then it becomes tough to appraise that you and/or your spouse have already re-established sufficient credit which may indicate that bankruptcy was caused due to circumstances beyond your control, which may include factors such as job loss, huge medical expenses etc.
• However, if the bankruptcy proceeding was completed within last 12 months then usually it becomes tough to appraise and find that you have already established required credit.

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The Veteran affairs departments suggests veterans who are facing problems in making regular mortgage payments to contact their servicer who can guide them on various options to avoid foreclosure. This becomes all the more important considering the fact that contrary to popular belief, services never want to foreclose any property. This is because foreclosing a property costs are very high. Services, therefore, offer the following options to veterans, in order to avoid foreclosure.

Repayment Plan – Under this plan, the borrower pays monthly installments on time along with some portion of the missed installments.

Special Forbearance –Forbearance means patience. Therefore, under this plan, the servicer agrees not to proceed with foreclosure and offers time to borrowers to repay the missed installments.

Loan Modification –Under this plan the missed payment is added to the loan balance with a new payment schedule.
Additional time to borrower to manage a private sale. This is basically to avoid foreclosure and therefore a method to protect your credit.

Short Sale – Short sale means selling at a lower price. Therefore, in this plan, the servicer allows borrower to sell his/her home for a lesser amount than the amount that is required to pay off the loan.

Deed-in-Lieu of Foreclosure –In this case, the borrower voluntarily opts to deed the property to the servicer by avoiding foreclosure.

Also, in case of a delinquent VA guaranteed loan, VA offers servicing assistance in order to supplement the assistance by the servicer, who has prime responsibility to extend service in order to protect the loan from being defaulted.

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VA mortgage loans are offered to eligible veterans and in-service members in addition to specified members of the National Guard. This loan is guaranteed and protected by the veteran affairs against defaults by veterans due to any reason. This guarantee, on one hand, encourages lenders to offer more VA mortgage loans to veterans and on the other hand protects the exposure of lenders. VA mortgage loans are offered through banks, lending institutions and other traditional forms of lending institutions. In this case, no down payment is required from veterans. Also, the VA mortgage rates offered to veterans are very competitive and veterans can negotiate rates with lenders.

Interest Rate Reduction Refinancing Loan (IRRRL):
The objective of IRRRL is to reduce the interest rate by refinancing an existing VA guaranteed loan or refinance in order to convert an adjustable rate mortgage to a fixed VA rate mortgage.

Requirement for reduced VA mortgage rate:
The loan to be refinanced must have been guaranteed through VA entitlement. Usually after paying off an existing debt, eligibility may be restored. But now after taking this new loan, it will reuse your entitlement. However, for VA mortgage rate reduction loan, certificate of eligibility is not required and the lender can verify the existing loan through the automated system. Also, VA does not require an appraisal or underwriting. But few of the lenders may insist for it. Another requirement is to attach a certificate that you occupied the home previously.

Loan Terms:
In the rate reduction loan, the rate of interest varies. However, duration of the loan can’t be more than 360 months. Like other mortgage payments, monthly payments are required to be made in this case also. Another important fact here is that not more than two points can be included in this loan plus reasonable closing cost.

Key facts of IRRRL:
Your lender can guide you further if you finally decided to borrow the rate reduction loan. However, the basic features are:

• The monthly payment for rate reduction loan must be less than the monthly payment made earlier.
• Except, adjustable rate mortgage, the rate of interest must be for less than the existing loan.
• The total maximum term can’t be more than 360 months or no more than ten years more than the original loan.
• In case of adjustable rate mortgage, this loan is offered as traditional annually adjustable and also as hybrid 3, 5, 7 and 10 years fixed rate.

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VA mortgage offers great advantages to veterans to get their own house. However, there is a limit on the maximum amount that a veteran can borrow through VA mortgages. But by including a non-veteran as a co-applicant, a veteran may obtain a higher loan amount.

However, in this case, VA’s guarantee will be offered only to the veteran’s portion of the loan. VA’s guarantee can’t be extended to the non-veteran’s share. The best step for a veteran in this case is to consult his mortgage advisor or lender, whether the lender will accept an application for a joint mortgage.

Usually, since the other applicant’s portion of loan is not secured, the lender may ask for a downpayment to cover risk on the unguaranteed portion of the loan. However, the lender has to submit an application for joint mortgages in which one applicant is a veteran for approval before the loan is offered. Also, the veteran should ask about the VA mortgage rate that would be charged.

Advantage of co-applicant:
On the other hand, the advantage of a joint application is that the income of both the applicants can be used to be eligible for the mortgage. Moreover, income of both the applicants can be used jointly to calculate the amount of the loan that is to be offered. But even in this case, the veteran’s income must be sufficient to cover at least his portion of the loan and/or the veteran’s share in the property. Similarly, the non-veteran’s income must be sufficient to cover the rest of the portion. However, it does not have much impact on the VA mortgage rates. But the veteran is free to negotiate the VA mortgage rates.

Calculation of the loan amount/affordability:
Inspite of co-application by a veteran and a non-veteran for a VA mortgage loan, VA shall use the method that it commonly uses to evaluate qualification of the veteran. This will include evaluating the veteran’s income on the basis of residual income. Under the residual income method, the underwriter determines whether a veteran can meet his day to day living expenses or not after paying his or her mortgage and payments such as credit card, taxes etc. The other method that VA uses is debt-to-income ratio. But in this case, VA only uses debt-to-income ratio. In this case, VA does not segregate debt into housing and non housing expenses and other debts.

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The enhanced VA mortgage option was launched to help veterans facing financial distress due to the Subprime problem. This enhanced VA mortgage option offers a choice to veterans who have borrowed traditional loans of refinancing to a Veteran VA guarantee home loan. This new program was launched as a result of the Veterans’ Benefits Improvements Act of 2008, which became law after the president signed October 10th, 2008.

Key features of enhanced VA mortgage option:
This enhanced VA mortgage option has authorized the department of veteran affairs to extend help to a significant number of veterans having borrowed Subprime mortgage into an affordable, VA guaranteed and safer loans. Infact, veterans who have borrowed Subprime mortgages at very high rates will get the maximum benefit.

Though previously, VA did not extend any guarantee to Subprime loans, the new act authorizes it to help millions of veterans who have borrowed Subprime loans.
With the changes in the VA’s home loan refinancing program due to the new Act, veterans who intend to refinance their existing Subprime traditional mortgages can do so. This refinancing can be done for up to 100 percent of the cost of the property. Earlier, the limit for refinancing in such loans was capped at 90 percent.

Enhanced VA mortgage option: Maximum loan & VA mortgage Rate
Apart from the above, the maximum amount of loan for such refinancing loans has also been increased. Earlier, the limit of maximum loans for refinancing was $ 144,000. With this law, such refinancing loans may be given up to $ 729,750, depending upon the location of the property. However, there is not much emphasis of VA mortgage rates in the enhanced option. But, expiry date of VA’s authority to guarantee few types of VA mortgage rates has been extended which is mentioned below.

The enhanced VA Mortgage Option also the option of increasing loan-to-value ratio and raising the maximum loan amount. This will certainly allow qualified veterans to get refinance through VA which in turn would result in saving on interest costs and avoid foreclosure.

This law also extended the deadline for VA’s authority to extend guarantee to adjustable rate mortgage and hybrid ARMs, which was schedule to expire in October, 2008. Now the authority to guarantee adjustable rate mortgage shall remain in force up to September 30th, 2012.

Since 1944, when the program to guarantee home loans was started, VA has extended guarantees to more than 18 million home loans. The total worth of these 18 million home loans is $911 billion. On the other hand, in 2008, $36 billion was offered to approximately 180,000 veterans, active duty service members and survivors.

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