Common misconceptions about reverse mortgage

# 1: Lender owns your home - False

This is the biggest misconception about reverse mortgage. Borrower owns the home as long as the home is their primary residence. Borrower's need to pay back the loan, when they leave the home.

# 2: Borrower can end up owing more than the value of the home - false

One of the biggest advantage of reverse mortgage is that the borrower can never owe more than the home's value even if the borrower has borrowed more than the value of the home.

# 3: Borrower's home must be debt free - false

It is not necessary that your home must be debt free or there can't be any mortgage on the home. Borrowers can go for reverse mortgage as long as the debt can be paid with some part or all of the funds of the reverse mortgage.

# 4: There are restrictions on the use of money obtained from reverse mortgage - false

There are no restrictions on the use of the funds. You can use the funds for a holiday, paying your debts, paying college fees of your children, anything.

Importance of FHA home inspection

Every home buyer should go for a FHA home inspection. When you want to buy a home, you want the home to be in proper condition. You don't want to face any problems in future or spend thousands of dollars in repair works. Getting a home inspection from a trained expert before buying a home is an intelligent step.

A home inspector will evaluate all the physical conditions of the home including construction, structure and mechanical systems. A inspector will also evaluate the working of major equipments (plumbing, air conditioning, electrical etc.) Inspector will provide the buyer with the detailed information about the home and any repair works that are needed in the home.

One thing home buyers should understand is that the home inspector will not evaluate the value of your home. Home inspection is different from an appraisal. Appraisal provides you with the estimated value of the home which is required by the lender before your FHA loan approval so that you don't borrow more than the value of the home.

FHA loans vs. Conventional loans

FHA loans have many benefits when compared to conventional loans. There are many benefits for the borrower and also for the lender as FHA loans are less riskier for the lenders as the loans are insured by FHA.

• Down Payment: For FHA loans only 3% down payment is required, while for a conventional loan minimum of 5% down payment is required and it can go up to 15%.

• Credit Scores: For conventional loans you require perfect credit scores while credit score is not an issue if you are applying for a FHA loan.

• Monthly Mortgage payments: It is less in FHA loans as compared to conventional loans.

• Property standards: FHA has certain property standards while conventional loans don't have any property standards. FHA Homes should be inspected properly and should be perfect for living.

Also, you can apply for a FHA mortgage loan after two years in case of a foreclosure and after three years in case of a bankruptcy.

Advantages of FHA streamline refinance

Advantages of FHA streamline refinance are:

• Biggest advantage of FHA streamline refinance is that there is no appraisal required. Most people don't qualify because there homes don't enough value, but if your qualify for streamline refinance, then it is not an issue for you.

• Most of the mortgage loans have high closing costs but FHA streamline refinance have very low closing costs.

• FHA streamline refinance can be wrapped up quickly as no appraiser to visit your home or verification of your employment as once you qualify for a FHA loan, these qualifications are carried over to FHA refinance mortgage.
  

• Another big advantage of streamline refinance is that "no income verification", so you don't have to worry about your income if it has been dropped.
  

Common myths of FHA loans

Myth # 1 - Government loans the money

Most common myth about FHA loan is that the loan is provided by the Federal Housing Administration (FHA) which is not the case. Government only guarantees for your loan and because of this guarantee, these loans are less riskier for the lenders or banks.

Myth # 2 - FHA loan takes longer to get approved

FHA home loans take no longer than other conventional home loans if you are properly guided by FHA loan officer who understands FHA mortgages completely.

Myth # 3 - Credit Score doesn't matter

This is neither completely true neither completely false. You must have a strong credit history for the past 12 months or so. You should have made all your payments on time without any delay. FHA may also look at your phone bills, rent and other bills to know credit worthiness.

FHA appraisal

FHA appraisal is a critical component of an FHA mortgage to determine the market value of the home. This market value serves the basis for the maximum FHA insured mortgage loan. FHA appraisal is done for the benefit of the lender and HUD and apart from determining the home value, it als0 provides an examination of the property for any defect that can be harmful for the people living in the house.

FHA appraisal determines the accurate value of the home to be financed which minimizes the risk of the lender because if the borrower defaults on the loan, then the home will provide the means of recovery for the lender. HUD requires appraisals for all FHA insured mortgages. FHA does not take guarantee that the home is in perfect condition but it ensures that the home is in safe and secure condition. Also, the home must meet all the FHA requirements.

FHA appraisers are required to repair or replace anything that affects the safe habitation of the house. FHA appraisers are required to make a complete inspection of the home, both from inside and also from outside. FHA appraisers must ensure that each and every thing is perfect may be its hand-rails, windows, smoke detectors, condition of the roofs and the kitchen. They must check whether all the components are working properly or not.

So, before buying a home, have a proper FHA appraisal so that any defects in the house can be repaired on time.

FHA closing costs

when you buy a home, there is always a closing cost apart from the down payment. These closing costs are charged to the buyer and are considered allowable and these costs are necessary to close the loan.

The closing cost and other fees that you can finance in your mortgage are:

• Loan origination fees.
• Any credit report costs required for FHA mortgage.
• Appraisal fees which is used to determine home-value.
• Costs included with the title.
• Recording fees and taxes associated with the purchase of the home.
• Deposit verification fees.