JUMBO Reverse Mortgage Facts

JUMBO Reverse Mortgage Facts

  • Borrower(s) minimum age of 62
  • SFR and 2-unit properties – minimum loan amount $850,000.00
  • Condos valued over $500K – spot approval on a case-by-case basis if not FHA approved
  • Maximum loan amount is $4 million
  • No upfront or monthly mortgage insurance premium
  • Mandatory Counseling required – specified agencies only
  • Available for both refinance and purchase transactions
  • Financial Assessment underwrite performed on all applicants

Examples by Age and Purchase Price of the Proprietary Purchase Reverse Mortgage

SFR & 2-Unit | Purchase Price Age Down Payment HomeSafe® Proceeds
$ 850,000 (Min) 62 $ 589,594 $ 260,406
74      493,799      356,201
80      445,342      404,658
88      389,674      460,326
$4,000,000 (Max) 62 $2,841,978 $1,158,022
74 2,419,353 1,580,647
80 2,206,203 1,739,797
88 1,959,978 2,040,022
$500,000 (Min) $4M (Max) 62 $ 372,490 $   127,510
74     316,140       183,860
80     287,720     212,280
88     254,890     245,110

These examples are for illustration purposes only.

  • The borrower(s) may retain up to four additional FINANCED properties
  • New-builds must have the Certificate of Occupancy issued prior to closing

This Proprietary Purchase Reverse Mortgage is not associated with the FHA reverse mortgage (HECM) program

NOTICE: This is not an offer to extend credit

Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 | April 9, 2018 | Copyright 2018

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct for your situation. This information is not legal advice and is for guidance only. You may reproduce this information in whole and not in part, providing you give full attribution to James Spray.

New Credit After Chapter 7 Bankruptcy


New Credit After Chapter 7 Bankruptcy

This post is written specifically for those who’ve recently been granted a Discharge from a Chapter 7 Bankruptcy. Chapter 7 is type of bankruptcy where the debtor does not make periodic payments to a bankruptcy trustee for 3 to 5 years.

The first step is to establish new credit in a strategic manner. Of course, you must also use your new credit in a responsible manner. In some cases, it is necessary to get your credit reports corrected to establish new credit. We’ll address both steps below.

Step One

First, when establishing new credit. Ignore well-meaning advice to get a $300/500 secured credit card from just any bank that will open an account for you. Start with joining a credit union. With most credit unions, there are no fees. Also, there are no annual fees and no-cost to use many ATMs all over the USA. Take a moment and read my post on credit unions.

In searching for the credit union (CU) to be the fit, do your homework. Call or stop in and ask about secured credit cards (this will lead you to someone that can answer or can get answers to your questions).

Now that you have found your CU, open your Share (savings) account. Save $1,000.00 or more. Secure this savings against a Visa or MasterCard issued by your credit union. To build good and excellent credit scores, use no more than 20% of your credit limit. Ever. For example, on your $1,000.00 credit limit, never have more than $200.00 in use. For best results, payoff the balance monthly. Your higher credit scores get you rewarded with lower interest rates on home and auto loans, insurance, credit cards and better employment opportunities.

Most credit unions will offer an unsecured card after you have established your good credit management practices for one-year. At this time, your savings securing your card will be released and another card issued. Your credit history will follow the new account.

Next, open 2 or 3 lower limit credit card or other revolving accounts (department stores, Internet stores, gas cards, etc.). The key is to have 3 to 4 revolving accounts open and in use occasionally. Do know that credit is a use it or lose it commodity.

On selecting the credit accounts, don’t bother applying to any creditors which were listed in your bankruptcy. Perform a Google Search such as this: “secured credit card + bankruptcy”. In your screening process, avoid those with an annual fee.

After about 9-12 months of opening the accounts as above discussed and using them as above discussed, you should have actual lending scores (FICO® Scores) in the 700-720 range. These techniques have helped many clients over several decades.

Step two

Not everyone will need to take step two. All should read the info in step two.

In order to build new credit after bankruptcy, you may need to get corrections made to one or more of your three credit reports to reflect only accurate information. By accurate information what we mean is to make sure that all your bankrupted accounts reflect a zero-balance due.

Understand that a bankruptcy discharge does not remove your previous credit history from your credit reports. Time does. Seven years from the date of last activity (last use or last payment), the account will be removed from your credit report.

Keep in mind that the older a negative item on your credit report is the less it counts against your credit score. Also, the longer you have information reporting on your credit report, the better it counts for your credit history which results in a better credit score.

As a rule of thumb, by the time the case is Discharged, several months following the filing of the bankruptcy case, most creditors will have reported the accounts as included in bankruptcy. In some instances, a creditor fails to update their record with the credit reporting agencies (CRA).

So, in these instances, let’s talk about getting the incorrect items corrected. Often, the dispute process is neither quick or easy. Understand the CRAs are not your friends. Use caution with what you say or write to a CRA. For specifics on how to dispute information on your credit reports, I suggest you read my blog titled: Credit Repair/Dispute Basics.

A word on entering comments to clarify some situation or another; such comments do not do anything positive for your credit scores or your credit history. It is of no benefit to you to make comments. Everything you say can and will be used against you. This is one of those times to consider the Miranda Warning along with the idiom less is more. When and only if necessary, you may address individual items as requested by your loan officer for an underwriter. Open or unresolved disputes on your credit report(s) can keep you from gaining credit approval.

To begin correcting your reports, you need to get a copy of each of your credit reports. There are three credit reporting agencies: TransUnion, Equifax and Experian. You can get a copy of your three credit reports once a year for free via the Official Site authorized by Federal law: http://www.annualcreditreport.com. It does you no good to only review one or two reports. Review all three of them annually.

For mortgage approval (purchase or refinance), two (2) years following your Discharge, you will be eligible to apply for an FHA, VA or Rural mortgage loan. Four (4) years following your Discharge, you will be eligible to apply for a conventional mortgage loan.

Contact me below or via Quora with specific questions.


Financially Speaking™ James Spray RMLO, CNE, FICO Pro | CO LMO 100008715 | NMLS 257365 |April 6, 2018 | Copyright 2018

Notice: The information on this blog is opinion and information. While I have made every effort to post and link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct for your situation. This information is not legal advice and is for guidance only. You may reproduce this information in whole and not in part, providing you give full attribution to James Spray.

The PURCHASE Reverse Mortgage (H4P)

What Is A Purchase Reverse Mortgage?

By way of background, a previous blog on reverse mortgages discusses the general facts regarding reverse mortgages. Let’s talk specifically about the purchase reverse mortgage, which is otherwise known as the Home Equity Conversion Mortgage (HECM) for purchase [H4P]. This product was created by the Housing and Economic Recovery Act of 2008 (HERA). The product is insured by the Federal Housing Administration (FHA) and guaranteed by the US Department of Housing and Urban Development (HUD). In short, the purchase reverse is a way to purchase a home with only a down payment. In addition to the down payment, the buyer is responsible for paying the homeowners insurance, property taxes and (if applicable) Home Owner Association (HOA) fees. There are no principal or interest payments required. However, one may make principal and interest payments by choice not necessity. Finally, if the loan balance on the reverse mortgage eventually exceeds the home’s value, the lender is insured against that loss.

Who Is It Good For?

BORROWER: Age 62 and older based on the youngest titleholder. A non-borrowing spouse under the age of 62 may be added to the loan providing the spouse is over the age of 18. There is no credit required, nor a credit score requirement and only minimal income requirements. This is a minimum documentation loan.

PROPERTY: Single family homes as well as 2-4-unit residential properties and all FHA approved condos are eligible. Title may be held as fee simple, a living trust, and leasehold or life estate. The property must meet FHA appraisal requirements. If the property does not meet FHA criteria (health and safety issues), a set aside account will be established for up to six months while the health and safety requirements of the FHA appraisal criteria are met. The property may be either an existing home or a new build home, so long as the property meets FHA standards.

Examples by Age and Purchase Price of a Home Equity Conversion Mortgage

Purchase Price Age Down Payment HECM Funds
$300,000 62 $174,688 $138,300
74 $153,088 $159,900
80 $138,388 $174,600
86 $118,888 $194,100
$679,650 62 $427,230 $274,180
74 $381,427 $319,983
80 $349,620 $351,790
86 $307,634 $393,776

January 1, 2018 – Pricing is subject to change at any time.

To illustrate – let’s look at the example of a $300,000.00 purchase at age 74: To purchase the residence, the HECM borrower would need $153,088 to close on the purchase of a $300,000.00 property. The balance of the proceeds is provided with the HECM as a benefit of the HECM program and include closing costs. In all examples of HECM purchase mortgages, no mortgage payments are required. All that must be paid out-of-pocket on an annual basis are real estate taxes, homeowners insurance and HOA fees (if applicable). There are no required payments of principal, interest, or other mortgage costs (including upfront costs) until termination of the HECM.

Who Likes Reverse Mortgages The Best? The Borrowers Who Have One!

95% Partially to fully meets my financial needs

93% Positive effect on my life

89% Would refer a friend

94% Report peace of mind

89% Report a more comfortable lifestyle

87% Report a better quality of life

Source: AARP December 2007. Survey of 1500 HECM Borrowers

Why The H4P Can Be Good

A reverse mortgage for purchase allows older Americans to buy a house that better suits their needs without dumping all their retirement assets into it, which would be the case in an all-cash transaction. It also lets them avoid dipping into their monthly fixed income, which would occur if they took out a traditional mortgage. It provides more purchasing power  and doesn’t drain all of the assets. It allows a buyer the luxury to get a better lot, to add all the upgrades they want and to still have no mortgage payment.

The home is titled in the owner’s home; as with all mortgages, the lender retains a security interest in the title. There are no monthly mortgage payments. Instead, the loan is repaid when the home is sold or the borrower no longer resides in the home. The repayment to the lender includes the amount borrowed, plus accumulated interest. Any remaining equity belongs to the borrower, heirs or estate. The heirs may purchase the property for the balance due or 95% of the value, whichever is less.

TIPS: There are no concessions allowed by sellers, builders or agents; this includes any personal property. As well, the buyer must pay for the title insurance. There can be no repair set-asides; all repairs, where major property deficiencies, such as

  • No running water
  • Leaking roof
  • No primary heating source
  • Inadequate electrical system (including lighting)
  • Inoperable doors and windows (inhibited ingress and egress)
  • State or local code violations

which threaten the health and safety of the homeowner and/or jeopardize the soundness and security of the property, must be completed by the seller prior to closing. (H4P FAQs per HUD).

NOTICE: (1) Rates are subject to change without notice. For specific and current information contact me or your H4P Specialist. (2) The illustrations in the above chart titled: *Examples by Buyers Age and Purchase Price, are representative examples only. The figures are not intended to be anything other than representative illustrations in order to convey the concept of the purchase reverse mortgage.

DISCLOSURE: The information provided herein is not intended to be an indication of loan approval or a commitment to lend. Additional program guidelines may apply. Information is subject to change without notice.

DISCLAIMER: This post does not represent that any of the information provided is approved by HUD or FHA or any US Government Agency.

Financially Speaking™ James Spray, RMLO, CNE, FICO Pro

CO LMO 100008715 | NMLS 257365| First Published 01/11/10 | Updated January 1, 2018

Notice: The information on this blog is opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only. You may use this information in whole and not in part providing you give full attribution to James Spray.

Do you prefer a ReLOC or HELOC? – Tools for Retirement Planning

Tom Davidson has written and illustrated another great article which I know you will enjoy reading. Here are the first few paragraphs which lead into the link to his wonderful presentation:

“HELOCs (Home Equity Lines of Credit) are widely used. Simply having one makes many people more comfortable. My wife and I had a standby HELOC for many years – ready to use as a convenience or in an emergency. Luckily that emergency never happened, but we felt well prepared knowing we had ready access to a substantial amount of cash that could be used for anything we needed. When I was a financial advisor, a HELOC was on my checklist to discuss with every client – at least those who were prudent with their money.

ReLOC: A Retirees Line of Credit

Is there a better alternative for homeowners over age 62?  A ReLOC may be a far better choice for many retirees. ReLOC is a nickname that stands for either Retirees Line oCredit or Reverse Mortgage Line of Credit. While ReLOCs share many features with HELOCs, three unique features make a ReLOC a line of credit designed for retirees:

  1. The amount you can access grows every month
  2. You don’t have to make payments until you permanently leave your home
  3. The loan can’t be canceled, reduced, or frozen as long as you keep up with basic mortgage obligations (property tax, homeowner’s insurance, basic maintenance, and Homeowner’s Association dues).

Here’s the borrowing limits for a ReLOC and a HELOC for a 63-year-old in a $400,000 house who lives to age 99:”

Source: Do you prefer a ReLOC or HELOC? – Tools for Retirement Planning

Don’t Risk Your Credit Score In Retirement – WBRC FOX6 News – Birmingham, AL

Cancelling infrequently used credit cards may seem like a good strategy, but your credit score may be adversely affected. Adam Carroll, Founder and Chief Education Officer of National Financial Educators, explains: “When you have a long-standing trade line, which is what a credit card is considered on your credit report, and you cancel that card for whatever reason, your score will actually go down as a result because one of the main impacts on your credit score is the length of credit history.” A shorter credit history translates to higher risk in the eyes of lenders.

Sean McQuay, Credit and Banking Expert at NerdWallet, agrees but includes another reason to keep older cards, noting that closing a card account results in “decreasing your overall credit line, which basically signals that a bank trusts you less.”

In addition to decreasing your overall credit line, closing an infrequently used account raises your credit utilization your total credit in use compared to your cumulative credit line. High credit utilization suggests a greater chance of falling behind on payments and/or defaulting on debts.

To avoid these pitfalls, make periodic small purchases on all your open credit cards to keep them active and pay the balances in full at the end of each billing period. By keeping credit spending low, you can still address debts while getting the full benefits of your credit account.

It’s okay to concentrate most of your credit spending in one account to maximize rewards. Just use alternate accounts often enough to keep them from being closed for lack of activity.

Source: Don’t Risk Your Credit Score In Retirement – WBRC FOX6 News – Birmingham, AL

How FICO Scores Recover After Negative Credit Info is Purged

Source: How FICO Scores Recover After Negative Credit Info is Purged

Do Credit Markets Watch the Waving Flag of Bankruptcy?   Liberty Street Economics

Personal bankruptcy is surprisingly common in the United States. Almost 15 percent of the U.S. population has filed for bankruptcy sometime over the past twenty-five years, based on my calculations using the New York Fed Consumer Credit Panel/Equifax (CCP). In 2015, roughly 800,000 debtors filed for bankruptcy, according to court records, representing 0.64 percent of U.S. households. One of the consequences for filers is a mark on their credit report—a bankruptcy “flag”—which indicates that the consumer has filed for bankruptcy.

This bankruptcy flag is visible to creditors and, according to the credit bureaus, hurts filers’ credit scores. To limit these effects, the Fair Credit Reporting Act restricts the length of time that credit bureaus can fly these flags on reports for each (personal) bankruptcy chapter: the flag for Chapter 7—in which debtors get a full discharge of (unsecured) debts after unprotected (non-exempt) assets are liquidated—must be removed after ten years, while the flag for Chapter 13—a partial debt repayment bankruptcy designed to help people keep their homes—is typically removed after seven years. For economists, the fixed timing of the flag removal (and the difference across bankruptcy chapters) gives us a laboratory to explore how the lifting of bankruptcy flags affects borrowers’ credit scores and credit outcomes, by comparing these outcomes directly before and after flag removal…

Source: Do Credit Markets Watch the Waving Flag of Bankruptcy?   Liberty Street Economics