December 20th, 2008 7:25 PM by Sam Kader
1. FHA 203(k) Rehab loan.
Additional funds for repairs of up to $35,000 as identified by appraiser or home inspector. The value is calculated based on what the house is going to be worth in the future.
2. Reverse Mortgage.
Even in the midst of a housing recession, reverse mortgages, which provide a line of credit or monthly payments to seniors 62 or older using an existing home as collateral has been booming. The Federal Housing Administration (FHA) which insures about 90 percent of reverse mortgages announced a 105 percent jump in the loans from 2000 to 2006.
Borrowers do not repay reverse mortgages until they sell their home, move or take some other action that means the house is no longer their main residence. Lenders collect the loan principal plus interest when a home is sold. FHA insurance protects lenders against loss if borrowers's equity withdrawals exceed the value of a home when it is sold. Most reverse mortgages are ARM products. Though, lenders are beginning to develop fixed-rate and larger denomination loans.
Borrowers taking out FHA-insured products undergo mandatory financial counseling and some state laws also require counseling. The volume of reverse mortgages is still not big enough to have an impact on the overall mortgage sector but with millions of baby boomers hit retirement age in coming years, that could all change.
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