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How to Discuss a Reverse Mortgage with Senior Parents

Posted by The Aramco Group on Wed, Oct 18, 2017 @ 09:10 AM

A daughter helps her aging mother look over documents

For many seniors, living on a fixed income is a way of life. Yet for some, social security and pensions aren’t enough.

Your parents may still have credit card debt or may have to cover payments for caregivers and other help. As their child, you see them struggle and you want to find a solution for them – which is where a reverse mortgage may come in handy. But how do you bring up something as sensitive as their financial situation?

In this article, we’ll cover how to discuss a reverse mortgage with your senior parents. This financial option is growing in popularity and, despite the misconceptions, it can help many people stay in their homes for longer, while easing their financial burdens. By having an informed and caring talk, you’ll encourage your parents to consider a reverse mortgage and readdress their approach to a better financial future.

How Do You Explain a Reverse Mortgage?

When first bringing up a reverse mortgage, it’s important that your parents have a clear understanding of what one is. They may have spent years paying off their mortgage, so their first question might be, “Does a reverse mortgage mean I get that money back?”

In a way, yes.

According to the National Reverse Mortgage Lenders Association (NRMLA), a reverse mortgage allows homeowners over 62 to take their home’s equity and convert it into cash. The mortgage lender pays cash to the homeowners in monthly installments, just like a mortgage payment. In other words, reverse mortgages are a way to give people like your parents access to their home’s equity without selling their house.

On a reverse mortgage, payment becomes due when the homeowner moves out of their home or passes away. Your parents would never have to worry about payments as long as they stay in the house. In the event of their passing, their estate would have to sell the home within one year, and the money generated from that sale would be used to pay back the loan.

How Can a Reverse Mortgage Help Your Parents?

Depending on your parents’ situation, a reverse mortgage can be a viable option with a range of benefits. Here are the main ways you can tell them a reverse mortgage would help.

They Will Experience Less Bank Control

Homeowners maintain the title and ownership of their home after obtaining a reverse mortgage. As nonrecourse loans, family or heirs wouldn’t need to worry about repaying them after their passing either.

Reverse mortgages are also regulated by the federal government, which means the bank wouldn’t be able to force your parents out of their home at any point. This particular misconception comes from the fact that in some instances, there may be no equity left in the home upon the homeowner’s passing. But without financial incentive to sell the home, the living family simply signs over the home to the lending bank.

It Can Ease Their Financial Burdens

Reverse mortgages are used by seniors to ease the financial burdens that come with older age.

Do your parents face any of the following expenses?

  • Outstanding credit card debt
  • Adult day care expenses
  • In-home care expenses
  • Expensive medication expenses
  • Past-due property taxes
  • Unmanageable current mortgage

If they do, they could be struggling to make ends meet and a reverse mortgage may be right for them.

It Won’t Interfere with Their Benefits

Despite common misconceptions, reverse mortgage payments are tax-free. What’s more, they don’t interfere with social security or medicare benefits. This would give your parents the ability to handle necessary monthly expenses upfront without having to worry about added costs.

They Can Stay in Their Current Home

One of the most significant benefits of a reverse mortgage is that it would allow your parents to stay in their current home. This is particularly helpful if feel they’re out of options due to their financial circumstances.

Even without any financial burdens, the monthly payments can also be used to live a more comfortable lifestyle, to finance large projects, or to put away in savings for emergencies.

It Can Assist Them with Downsizing

If your parents aren’t looking to stay in their current home, a reverse mortgage could still be useful.

The HECM for Purchase, or Home Equity Conversion Mortgage, is a program that allows seniors to purchase a new home by putting a reverse mortgage on it. Homeowners combine the money from their previous home’s sale, savings, and income sources with a reverse mortgage to finance the home. The HECM for Purchase is a good option for your parents if they’re hoping to downsize and/or relocate to be closer to you and your family.

What Do Your Parents Need to Consider?

Although a reverse mortgage offers major benefits to many seniors, there are several important considerations that your parents should make before moving forward.

Do They Have Ongoing Financial Obligations?

Despite the payments received from the bank, your parents would still be required to stay up-to-date on their home insurance and real estate taxes. They may be susceptible to default if they fall behind.

Homeowners are also required to maintain the condition of their home, including upkeep and necessary repairs. If your parents expect their home to require extensive renovations in the coming years, the money obtained from reverse mortgages may simply cover these expenses and nothing more.

Do They Rely on Medicaid?

Reverse mortgages can affect your senior eligibility for Medicaid. The program has income eligibility requirements, so if your parents elect to take a large sum over the monthly payment, this could put them over the threshold and disqualify them. If they rely on Medicaid to cover medical expenses, be sure to weigh the financial benefits of a reverse mortgage against the loss of coverage.

Do They Have Residency Obligations?

The home that the reverse mortgage would be taken out on would have to remain their primary place of residence. As previously mentioned, the loan is paid back upon the homeowner’s death or if the homeowner moves out. While there are circumstances where a younger spouse under 62 can stay in the home, other residents, such as family members, may not be so lucky.

Moving Forward with a Reverse Mortgage

Your parents will be required to schedule a HUD counseling session to ask any questions and ensure they fully understand the reverse mortgage product. The counselor will then issue a certificate saying they have completed counseling, which is required when applying for a reverse mortgage. Be sure that your parents only go through a certified member of the National Reverse Mortgage Lenders Association (NRMLA), who will uphold the highest standards throughout the process.

There’s a lot to consider when talking with your parents about a reverse mortgage. Their current living financial situation must be honestly weighed against potential gains. Yet regardless of their choice, it’s important your parents know that you’re on their side. You only want the best for them, and that’s why you want to discuss the reverse mortgage as a possible option. With that in mind, everyone will be more confident about whatever decision your parents make.

Topics: Reverse Mortgage

Calif. wildfire victims eligible for mortgage assistance

Posted by The Aramco Group on Tue, Oct 17, 2017 @ 14:10 PM

Among the 5,700 structures that have been destroyed as a result of the wildfires in northern California are numerous families who have been displaced. The blazes which have killed more than 40 people, scorched over 200,000 acres has ravaged areas like Napa, Oroville, Sonoma and Calistoga. An estimated 100,000 people have been affected.

Fannie Mae and Freddie Mac have issued disaster relief policies that allow homeowners whose mortgages are backed by the federal mortgage servicers, to defer mortgage payments for up to 12-months. Eligible homeowners will not be subject to late fees or negative credit reporting during this time. Freddie Mac also announced last week that it will suspend foreclosures for those impacted.

Additionally, the IRS has extended deadlines for taxpayers and businesses in the regions most affected by the fires. Individual income taxes and some corporate taxes that were extended in April became due on Monday.

Meanwhile, conforming no-point 30-year fixed mortgage rates are averaging 3.875 percent while 15-year rates are near 3.25 percent.

Do you have a question for Real Estate & Mortgage Analyst Mehran Aram? Submit your queries about a home purchase, refinance, or reverse mortgage via Aramco.Biz, social media (#AramcoReport), or over the phone at (866) 381-8888 and your questions may be featured in an upcoming article.

Locking in your mortgage rate

Posted by The Aramco Group on Mon, Oct 16, 2017 @ 14:10 PM

Historically low interest rates are saving home buyers money – vital when facing high home prices. When shopping for a home loan, lenders will often give borrowers the opportunity to lock in an interest rate for certain period. Because mortgage rates can be volatile, picking the right day, when interest rates are at a low, can make a difference in monthly payments.

Most banks offer buyers a standard 30-days, obligating the lender to offer the loan at the agreed upon rate if escrow closes during that time frame regardless of whether mortgage rates have changed. Consumers can be offered a lock period of 45, 60 or even 90 days but in exchange for higher closing costs or points.

Although a rate lock sounds ironclad for buyers there are exceptions. Should a borrower's credit score or income change significantly, the bank generally reserves the right to revoke the agreement. Additionally, buyers risk not being able to lower their interest should rates drop.

With rates near their lowest levels in nearly 10 months, experts advise those considering a purchase or refinance to act quickly. Conforming no-point 30-year fixed mortgage rates are averaging 3.875 percent while 15-year rates are near 3.25 percent.

Do you have a question for Real Estate & Mortgage Analyst Mehran Aram? Submit your queries about a home purchase, refinance, or reverse mortgage via Aramco.Biz, social media (#AramcoReport), or over the phone at (866) 381-8888 and your questions may be featured in an upcoming article.

San Diego County mails out nearly 1m property tax bills

Posted by The Aramco Group on Sun, Oct 15, 2017 @ 14:10 PM

San Diego's Treasurer-Tax Collector Dan McAllister announced this month that the County would be sending out over 990,000 property tax bills for this fiscal year.

"Rising home prices are pushing up property taxes. Our office is set to collect $6.05 billion in secured property taxes for 2017-2018 compared to $5.68 billion last year," McAllister said. "We are sending tax bills to 4,732 new properties this cycle, which means building is also on the rise."

The first installment of the secured property taxes is due November 1 and become delinquent on December 11. Homeowners are getting an extra day this year since the normal due date of December 10 falls on a Sunday this year.

Last year San Diegans paid their taxes at a remarkable 99.2 percent rate. Meanwhile, conforming no-point 30-year fixed mortgage rates are averaging 3.875 percent while 15-year rates are near 3.25 percent.

Do you have a question for Real Estate & Mortgage Analyst Mehran Aram? Submit your queries about a home purchase, refinance, or reverse mortgage via Aramco.Biz, social media (#AramcoReport), or over the phone at (866) 381-8888 and your questions may be featured in an upcoming article.

Foreclosure filings at 11-year low

Posted by The Aramco Group on Sat, Oct 14, 2017 @ 14:10 PM

Foreclosure activity fell to its lowest levels since 2006 during the third quarter, according to ATTOM Data Solutions U.S. Foreclosure Market report, released last week. In total, there were 191,824 U.S. properties with foreclosure filings – default notices, scheduled auctions or bank repossessions – down 13 percent from the previous quarter and 35 percent from the same period last year.

Banks initiated the foreclosure process on 93,724 properties nationwide last quarter and completed the process on 55,993. In San Diego there were 717 foreclosure starts, down 0.186 percent from last year.

New post-recession lending standards, which have grown stricter, are largely behind the plunge in foreclosures. Today, conforming no-point 30-year fixed mortgage rates are averaging 3.875 percent while 15-year rates are near 3.25 percent.

Do you have a question for Real Estate & Mortgage Analyst Mehran Aram? Submit your queries about a home purchase, refinance, or reverse mortgage via Aramco.Biz, social media (#AramcoReport), or over the phone at (866) 381-8888 and your questions may be featured in an upcoming article.

Inflation a conundrum for fed policy makers

Posted by The Aramco Group on Fri, Oct 13, 2017 @ 14:10 PM

Minutes from the Federal Reserve's Open Market Committee meeting in September reveals that while officials are seeing vast improvements in the economy and a strong job market, there remains questions over whether or not markets could handle another rate hike later this year. Officials seem sharply divided over whether to increase short-term interest rates this year amid persistently weak inflation readings.

The Fed currently cites inflation showing a gain of only 1.4 percent – below the generally accepted target of two percent. Despite this, traders still widely believe that policymakers would agree on a December increase. CME Group fed funds futures place the changes of an end-of-year rate hike near 90 percent.

Overall, Fed officials judged the economy to heading in a positive direction despite recent isolated downturns from the summer's back-to-back hurricanes. Meanwhile, conforming no-point 30-year fixed mortgage rates averaging 3.875 percent while 15-year rates are near 3.25 percent.

Do you have a question for Real Estate & Mortgage Analyst Mehran Aram? Submit your queries about a home purchase, refinance, or reverse mortgage via Aramco.Biz, social media (#AramcoReport), or over the phone at (866) 381-8888 and your questions may be featured in an upcoming article.

The State of Reverse Mortgages: Stay Informed with the Statistics [INFOGRAPHIC]

Posted by The Aramco Group on Fri, Oct 13, 2017 @ 09:10 AM

As homeowners get older and need new ways to generate income, the reverse mortgage market can play a vital financial role. Reverse mortgages allow homeowners to use the equity in their homes to increase their financial stability and improve their quality of life. Statistics show that reverse mortgages can be a valuable option for qualifying adults. Could they be the right option for you?  

1704_ig_aramco_reverse-mortgage-by-the-numbers.jpg

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Am I Eligible?:

  • Are you over 62 years of age?
  • Do you own your home outright?
  • Do you use your home as your principal residence?
  • Do you hold the majority of equity in your home?

2015 Popularity of Reverse Mortgages by State and City

#1 California (8.3%)

#2 Texas (7.4%)

#3 New York (5.9%)

Denver, Seattle, Portland

Number of Reverse Mortgages by Year

Reverse Mortgages by Numbers

1,030,632

The total number of federally insured Home Equity Conversion Mortgages (HECMs) issued since the program’s inception in 1990

62%

The percentage of seniors reporting their assets as a major source of income

38%

The percentage of baby boomers feeling on track to reaching their retirement goals

33%

The percentage of senior households with no money left over each month after covering essential expenses

67%

The percentage of HECM borrowers using reverse mortgages to pay off debt

With increasing lifespans and rising healthcare costs, reverse mortgages can help keep older Americans financially secure throughout their retirement. From paying off debt to enhancing quality of life, this accessible option can help eligible seniors get the most out of their golden years.

Topics: Reverse Mortgage, Reverse Mortgage Statistics

Closing escrow on a Friday

Posted by The Aramco Group on Thu, Oct 12, 2017 @ 14:10 PM

For the superstitious avoiding any big business on Friday the thirteenth is a given but for homebuyers, there is more logic than myth behind this – at least when it comes to Fridays in general. Realtors generally agree than choosing a particular day or week of the month to close escrow on a home purchase can have significant advantages.

Arranging for escrow to close on a Monday, Tuesday or Wednesday allows for the sometimes-unavoidable last-minute complications before the weekend. Should an issue arise on a scheduled Friday closing, it might delay funding and recording with the county until the following week. This could also cost buyers who scheduled movers on a Saturday.

When signing a purchase contract, both buyers and sellers should agree on a target date that is reasonable and gives ample time for unforeseen complications. Those looking to purchase or refinance will find conforming no-point 30-year fixed mortgage rates averaging 3.875 percent while 15-year rates are near 3.25 percent.

Do you have a question for Real Estate & Mortgage Analyst Mehran Aram? Submit your queries about a home purchase, refinance, or reverse mortgage via Aramco.Biz, social media (#AramcoReport), or over the phone at (866) 381-8888 and your questions may be featured in an upcoming article.

The income gap between owners and renters

Posted by The Aramco Group on Wed, Oct 11, 2017 @ 14:10 PM

Renters currently account for 37 percent of all households in America or just over 43.7 million homes. This is an increase of nearly 7 million since 2005, according to U.S. Census Bureau data analyzed by online real estate site Zillow.

As home prices continue to climb nationwide, transitioning from renter to owner has grown increasingly difficult, leading to a growth in long-term renters who have no intention of buying in the future. Studies show that making the leap from renting to owning a home is further complicated by a statistical reality: the typical renter household makes an average of $50,000 less per year than those who own. According to the Zillow Group Consumer Housing Trends Report 2017, renters earn a median income of $37,500, essentially unfeasible to buy in most markets.

Still, this has not deterred Americans' desire to become homeowners. Over half of Millennials in a Zillow survey consider buying over renting.

Meanwhile, conforming no-point 30-year fixed mortgage rates averaging 3.875 percent while 15-year rates are near 3.25 percent.

Do you have a question for Real Estate & Mortgage Analyst Mehran Aram? Submit your queries about a home purchase, refinance, or reverse mortgage via Aramco.Biz, social media (#AramcoReport), or over the phone at (866) 381-8888 and your questions may be featured in an upcoming article.

12 Cities With Booming Real Estate Markets

Posted by The Aramco Group on Wed, Oct 11, 2017 @ 09:10 AM

AdobeStock_132441210.jpeg

Real estate is making a comeback. At least, that’s how it feels in some areas of the United States. People are flocking west and south, whether it be to the sunny beaches of Florida or the mountain landscapes of Colorado. Perhaps you’ve considered making a similar change.

Whether you’re looking to relocate for work, be closer to family, or just experience something new, there’s sure to be a booming real estate market in a city that’s right for you. So which markets are booming this year? Let’s read on to find out.

Jacksonville, FL

Real Estate markets across the Sunshine State are expanding. Jacksonville is no exception: with a 2016 job growth rate of 3.8%, people from across the nation are flocking for new work opportunities. Let’s not forget Jacksonville has the same amenities offered in larger cities, including sports teams (go Jaguars!) and universities. Couple this with beaches to the East and sunny weather, and it’s no wonder Jacksonville has grown in popularity.

Cape Coral–Fort Myers, FL

Another sweet spot in Florida is Cape Coral-Fort Myers, located on the Gulf Coast. Vacancy rates have dropped over the past year, thanks in part to its job growth rate stemming from the hospitality and real estate industries. Baseball fans are also in luck: Fort Myers is home to the Boston Red Sox and Minnesota Twins’ spring training sites.

Nashville, TN

The capital of the Volunteer State was predicted by Zillow to be the hottest housing market in 2017, with a forecasted home value appreciation of 4.3%. Employment opportunities are available in the strong healthcare industry, which has contributed to the city’s overall growth. While country music is a mainstay in the Nashville’s culture, the city has so much more to offer. Residents can also enjoy a rich, diverse music scene, and independent restaurant options.

Knoxville, TN

This Tennessee city is expected to see a 4.4% increase in home value this year, and it’s not hard to see why. Knoxville has a diverse culture and a rich music scene. For those looking to enjoy the outdoors, The Cumberland Gap and the Smoky Mountains are just 90-minute drives away. Sports fans will also enjoy the local teams and the University of Tennessee Volunteers. Best of all, Knoxville has a lower cost-of-living compared to other southern cities like Nashville and Atlanta.

Seattle, WA

At 5.6%, this Washington State city has the nation’s largest expected home value growth rate. Unlike other cities mentioned on this list, however, Seattle’s cost of living is expected to rise in the near future. This is due to tech companies like Amazon growing and constantly hiring new employees. Nevertheless, Seattle still boasts beautiful scenery and a laid-back attitude that makes for a great living situation. Better yet, Seattle gets less annual rainfall and fewer rainy days than cities along the Great Lakes.

Portland, OR

Yes, Portland is known for its hipster vibes, but that’s no reason to ignore this booming city. Zillow projects home values to increase 5.2%. The city features lush, green parks and is within a few hours of the Pacific Ocean and Mt. Hood National Forest. Portland is perhaps most known for it’s “Keep Portland Weird” mentality, and is therefore home to independent breweries, restaurants, and shops. Though down from 2016’s whopping 15% growth rate, Portland still remains of the most popular cities in the nation.

Sacramento, CA

The Golden State’s capital is growing in popularity, with an expected 4.8% rise in home value this year. Similar to California’s large cities of San Francisco and Los Angeles, Sacramento is known for its rich culture and diversity. Yet a lower cost of living makes Sacremento a perfect spot for residents looking to keep their spending in check. Let’s not forget the 28-acre Old Sacramento State Historic Park, simply known as “Old Sacramento”, which is now a national landmark.

Denver, CO

The capital of Colorado has become one of the fastest-growing cities in the nation, contributing to its projected 3.6% increase in home values this year. Don’t let its location fool you: Denver is home to beautiful year-round weather. Close proximity to the Rocky Mountains allows for residents to take up snowboarding and skiing in the winter, and hiking and camping in the summer. Denver is also a bustling city, complete with distinct neighborhoods that feature their own personalities. It’s no wonder U.S. News ranked Denver the second best place to live in the nation!

Colorado Springs, CO

About 90 minutes south of Denver is another Colorado hotspot: Colorado Springs. Similar to Denver, this city enjoys year-round mild weather and close proximity to outdoor activities (including Pikes Peak). Yet Colorado Springs also enjoys a lower cost of living, allowing residents to save a bit more. The city itself is home to beautiful parks, local entertainment options, and great schools. Complete with easy drives to Denver and ski resorts like Aspen, it’s easy to see the appeal of Colorado Springs.

Ogden, UT

Forty miles north of Salt Lake City is the mid-size city of Ogden. Zillow estimates this town’s home value to rise by 4.7%. Similar to Denver and Colorado Springs, Ogden features easy accessibility to the outdoors, making it a great location for mountain bikers, skiers, and snowboarders. Ogden also features a low unemployment rate (2.9%) coupled with growing income (1%). New families should take a second glance at Ogden, too, as Forbes named it one of the best cities for raising a family.

San Antonio, TX

Residents of this Texas city enjoy a low cost of living compared to other cities in the state, thanks in part to Joint Base San Antonio. Employment opportunities are also available from large companies like USAA and Toyota. What’s more, new and established residents alike can always take advantage of the rich history and diverse culture this city has to offer.

Grand Rapids, MI

Located on the western side of the state, Grand Rapids enjoyed steady job growth (2.7%) in 2016 across various industries from education to manufacturing. Residents of this growing city take advantage of excellent craft breweries and the local art scene. Despite being the second-largest metro area in the state (after Detroit), Grand Rapids has an easy-going charm that’s reminiscent of the Midwest at large.

With a wide variety of climates, landscapes, and entertainment options to choose from in this list of booming real estate markets, where will you decide to live and work?

Topics: real estate