What is a Reverse Mortgage?

What is a Reverse Mortgage?

When you hear the word mortgage the first thing many people think of are traditional mortgages for buying or refinancing a home. Traditional mortgage loans are used to purchase property or to borrow money against the equity in your home. The borrower and lender come to an agreement that the borrower will pay back the borrowed sum of money plus interest in an agreed upon time window until the borrower is able to pay off the loan. 

In contrast, a reverse mortgage is a loan that allows a homeowner to borrow money utilizing the equity in their home where no payments are made monthly. Unlike traditional mortgages, reverse mortgages do not involve monthly mortgage payments back to the lender. Instead, the lender will pay the borrower a lump sum, monthly payments, or a line of credit to the borrower collateralized by equity in the home. The borrower will retain title to their home and the reverse mortgage loan will be paid back upon selling the home, leaving the home as a primary residence or if the borrower passes away. If married and one spouse passes away, the other spouse can stay in the home until they vacate the property.

What to Look Out for…

While reverse mortgages can be a very smart decision for the educated homeowner, they can be complicated and have been an area where scammers have taken advantage of retirees looking to make ends meet. It is important to work with upstanding lenders or brokers like 101 Loan that have experience with this type of mortgage and a proven track record as evidenced by their online reviews (yelp and google) and by professionals like financial planners, tax planners and estate planners that refer clients to reverse mortgage experts like 101 Loan.

How does a Reverse Mortgage work and How does one Qualify? 

Traditional mortgages that are called “Forward mortgages” require monthly payments all with the premise that the loan will eventually be paid off in a given period of time in the future.  Reverse mortgages don’t require monthly mortgage payments and as a result accumulate interest over time with the mortgage balance growing each month as payments to the mortgage are not paid.  

In addition, there are qualifying conditions the borrower must meet to qualify for a reverse mortgage.  First and foremost, the property that will be used for the reverse mortgage must be their primary residence of the borrower and have at least 50% equity in the property. Next the borrowers must be at least age 62 to qualify and have some lever of residual income to afford such costs as home insurance and property tax.  (There are exceptions to this)

Types of Reverse Mortgages

The most common type of reverse mortgage is known as a home equity conversion mortgage or HECM. HECM’s are insured by the Federal Housing Administration and have an upper loan limit set by the FHA. 

Jumbo reverse mortgages are necessary for borrowers looking to borrow more than the HECM limit. There are also single-purpose reverse mortgages which are a reverse mortgage in which the funds are used for a specific purpose, for example home upkeep or maintenance projects. Proprietary reverse mortgages are similar to a HECM. The major differences are that proprietary reverse mortgages are secured through private lenders and are not insured by the FHA.  For more info, see our Reverse Mortgage page. 

How can Rob McCarthy @ 101 Loan help?

If you are looking into a reverse mortgage for the purposes of freeing up cash, paying off outstanding bills, covering future expenses, or any other reason you deserve to have assurance that you are getting the best deal possible.  If it’s your very first time learning about what is a reverse mortgage, you will quickly learn small differences in rates, loan amounts, or loan conditions will make significant differences in your future finances. Rob McCarthy and the team at 101 Loan are reverse mortgage experts and have a long track record of supporting their clients to find the best reverse mortgage for their unique situation. 

Working with 101 Loan, you will have the opportunity to meet with a lending professional who will break down the type of reverse mortgage that will fit your specific goals and needs. They will then go to work gathering information through their connections with over 50 top lenders to make sure they are able to find the lowest possible rates and fees for your reverse mortgage. Finally, they will provide you with an easy to understand document that details your various loan options, rates, costs, amortization schedule and next steps to move forward. All through the process, 101 Loan will be there to answer any questions you might have to ensure you have the peace of mind you deserve.

There are many different options and possibilities when it comes to finding the reverse mortgage or any mortgage that is right for you. Having 101 Loan walk alongside you will take out the guesswork. 101 Loan also offers a full suite of services including Purchasing, Refinancing, Reverse Mortgages, and Commercial Loans.

 

For More Info, please contact:

Rob McCarthy
Senior Mortgage Advisor
www.101Loan.com 
408-377-4123 o  650-465-8957    408-608-1921 f
101 Loan is located at: 6020 Hellyer Ave #150, San Jose, CA 95138
CA DRE #01165697  NMLS #121019

Residential Development Financing

Where to Start with Residential Development Financing?

The types of real estate classified as residential developments come in many shapes and sizes. Residential developments can range from a multi-family residence, suburban neighborhoods full of single-family homes, to major apartment buildings with sales prices in the tens or hundreds of millions. There is an important need for appropriate housing in today’s real estate market and when done right, investing in residential development can bring major financial rewards.

When exploring the chosen market area, patterns of the types of real estate available for your development project will emerge. There are options of buying open land to develop, buying a pre-existing property to renovate, along with vast options for the size and scale of the project. The most important thing is to develop a plan that realistically takes in the need for housing in the chosen area, the financial portfolio of yourself or business, and tolerance for risk. Planning ahead in this area will seriously increase your chances of success and make sure you are prepared as you head into the next step of the development process, financing the project.

Understanding the options for residential development financing can be a daunting experience. Small differences in loan amounts and interest rates will make a monumental difference over the course of the development process. These numbers can be the difference between successful completion of your development project or joining the ranks of unfinished developments across the country. This is true whether it is your first time seeking residential development financing or you are an experienced developer seeking funding sources for large scale commercial loans. 

It is important to have a strong plan for every step in the development process. You will need to maximize efficiency each step of the way to achieve the long term goal. If one piece of the development puzzle goes wrong, it can come with serious financial consequences. You’ve started to formulate a plan for the what, where, and how to achieve the goals for your development. Having a trusted and experienced mortgage consultant to walk alongside you can be well worth it. 

Residential Development Financing Basics

For many looking into property development, financing will typically be the intelligent choice for maximizing the earning potential of your project. As you gather information, you’ll start to have an idea of details like what the down payment will be or what will be best for a repayment schedule. You will also start to realize the incredible array of options available when it comes to lending. 

Different types of loans are intended for different situations in residential development.

  • Acquisition loans are intended to acquire property. 
  • Land Development Loans are intended for the property development of an already owned piece of land.
  • Acquisition and Development Loans are funding for both acquiring property and development of that property.
  • Construction loans are intended for building on property. The differences found with construction loans are that payment frequency can depend on each phase of the building process. Specific criteria and phase completion also must be met for the release of the next state of funds. 

It is of extreme importance that you seek the appropriate loan type based on your situation to prevent losing time and money on your important development project. 

Bank Loans vs. Private Lenders

Throughout the process of securing residential development financing many decisions need to be made. You also must decide between seeking a bank loan or working with a private lender. Banks in the United States are required to adhere to lending regulations set by the government. Bank loans will have specific criteria regarding your personal or business credit standing along with other criteria. Loans from private lenders are funded by private companies or individuals that are able to independently make their lending decisions. A loan from a Private Lender can come with greater flexibility but may also be accompanied by higher interest rates. The specific financial profile of yourself or your business will largely determine if you will seek lending from a Bank or Private Lender.

How can Rob with 101 Loan help?

Whether it is your first time seeking residential development financing or you are an experienced developer researching commercial loans it can clearly be beneficial to work with a professional mortgage consultant. Rob McCarthy and the team at 101 Loan are ready to work for you to break down the multitude of financing options for your real estate development project. 101 Loan has a proven track record and will assist you in demanding the lowest possible interest rates and best possible loan package through their access to over 50 top lenders. 

101 Loan will take your financial profile and find the options from over 50 of the best lenders in the United States. We will match you with the optimal loan amount, lowest interest rates, and most favorable terms while making sure your long term goals and short term needs are kept at the forefront of the experience. 101 Loan provides a comprehensive, easy-to-understand list of loan options with all other pertinent information to give you the peace of mind that you are making the best possible decision for your residential development financing for you or your business. The team at 101 Loan will make sure you know what items and information you need to move forward and will assist in making sure your offer is accepted and closed on-time. 

There are thousands of decisions that will be made over the course of a real estate development project. When it comes to getting the optimal financing, every decision made can mean the difference between success and failure. Let 101 Loan walk with you to make sure you are making the right decisions. 101 Loan also offers a full suite of services including Purchasing, Refinancing, Reverse Mortgages, and Commercial Loans.

How to Choose a Home Lender

Obtaining a mortgage in today’s market for a future purchase or refinance can be a complex ordeal. A top financing professional can be critical in getting your offer accepted, or locking in the lowest rates and fees with the most favorable terms. Below are some questions you will want to ask, to make the best choice in choosing your residential or commercial lender or mortgage originator.

 

How will you help me determine my long and short term financial goals in relationship to buying or refinancing a property? Furthermore, which programs are best for me?

We will analyze your current financial picture, ask the right questions on what you are trying to accomplish now and in the future and then help you by setting up a plan accordingly. Questions we often ask are:

1)     How long will you live in the area?

2)     How long will you keep the property?

3)     Are you planning on doing any remodeling or adding on to the property in the future?

4)     When do you plan on retiring?

5)     Are you after cash flow or paying off the loan as quickly as possible?

6)     Plus many more…

Once we have your answers, we will advise on what loan program is best for you and what loan structure will meet your long and short term financial goals. This is done at the pre-approval appointment and reviewed again once in contract or when we lock your loan.

 

How will you help me understand the tax benefits of home financing for the future purchase of a home? We will determine your approximate tax write offs, net tax benefit, and net effective payment based on your tax bracket. Then we will compare your current mortgage payment to rent and you the benefit on a monthly basis in real dollars.

 

What is your process in assisting me so I can get my offers accepted?

We do several things that include providing a preapproval in ms-word, so then at moment’s notice the Realtor can modify the price of the preapproval to match any offer if purchasing below or at the original preapproved amount. We also call the listing agent on each offer to convey the buyers compensating factors and to differentiate the offer from everyone else’s. Lastly, we will help coordinate short closings and “as is” offers with no contingencies.

 

What methodologies will you use to lock at the “right time” and what happens if rates drop?

At 101 Loan, we use many online interactive subscription programs to track rates based on bond market activity, economic report activity and market trends. This provides our clients with the power to lock at the “right” time vs the wrong time when rates are worse. In addition, if interest rates drop, we have strong relationships to renegotiate the rate with the lender at a lower rate or pull the loan from the lender and go with another lender that is offering a more favorable rate. Having access to over 50 lenders provides a value proposition that other lenders and mortgage originators just can’t provide.

 

How long have you worked with the Realtor that referred me and what is your track record for closing on time per the contract?

We have worked with many agents throughout the bay area since 1990 and have closed over 3000 loans with a 99.99% success rate.

 

How long have you been in the business and what percentage of your business are purchases vs. refinances? 101 Loan has been providing mortgage financing services since 1990 closing an average of 75% purchase business with the remainder of refinance business from past, referred and online originated clients.

 

Can you provide me testimonials from clients that have used your services in recent past?

You bet…check out yelp at https://www.yelp.com/biz/101-loan-mortgage-campbell where we have over 200 “5 Star” reviews.

 

Do you provide personalized service?

Rob McCarthy and his team bring over 30 years of experience to the mortgage financing transaction, offering client’s unsurpassed exemplary service, competitive rates and “out of the box” thinking. His dedication and hard work yield customized mortgage solutions quickly and efficiently. Rob’s mortgage planning services start with a detailed pre‐qualification to determine your current needs and long term goals and loan options that apply to your situation, whether purchasing or refinancing.

 

How competitive are your rates?

As a mortgage originator, we have over 50 different relationships with direct lenders, portfolio lenders and mortgage banks; ensuring our clients have access to the best loan programs and lowest rates. As a result, you will receive the most competitive interest rates and access to every loan program available.

 

How fast can you process and close my loan?

Very quickly. Most loan officers work by themselves to close their loans. Some may even have an assistant but regardless usually take a long time to provide their clients with a preapproval, let alone even close on time per the ratified purchase contract.

At 101 Loan, we have a team that plays an integral part of quickly expediting requests and closing our client’s loan. Our preapprovals take 1 to 2 business days, and our closing can take between 3 and 4 weeks dependent on the loan program or the bank, the customer chooses.

Our team includes the following:

  •   Rob McCarthy – Owner and Senior Mortgage Planner who architects every purchase file.
  •   Renee Stephens – Senior Loan Coordinator, who reviews all files and provides the preapproval and closing estimate before any offer.

With decades of experience, our staff can quickly and efficiently process your loan ensuring a smooth and efficient closing. In general, we can close your loan quicker than our competition while still providing you with the best rates on the market.

 

Are you established?

101 Loan LLC and its agents have been providing mortgage financing solutions to consumers and the Real

Estate community for over 3 decades. Rob McCarthy has been providing the same services since 1990, and he is considered one of the top mortgage planner’s in the bay area for loan volume closed. This is from his strong relationships with realtors, past clients and lenders.

 

What separates us from the competition?

  •   Over 30 Years of Experience in Residential and Commercial Financing with Access to over 45 Lenders resulting in the Lowest Rates, Lowest Fees and Timely Service.
  •   Over 200 “5 Star Reviews” in Yelp, Facebook, Google and Linkedin.
  •   Expert in Reverse Mortgages and Jumbo Reverse Mortgages
  •   Access to Land, Construction and Commercial Financing.
  •   Access to All First Time Buyer Programs including FHA, VA and City Programs.

 

Contact us with any questions.

Pre-Qualification vs Pre-Approval

The Pre‐Qualification…Your FIRST Step to Financing a Home

 

Because of the complexities of home financing and the numerous loan programs available to the general public, prequalifying must be done by a qualified loan agent (preferably a mortgage originator) in person, via e-mail or over the phone. The prequalification process is both objective and subjective. Lenders look at much more than just how much cash someone has or have much do they make. They look at the “overall picture”, for what lenders call compensating factors, of the applicant. These compensating factors include income, debt, assets, and credit. Consulting with a qualified loan agent, can help you determine which compensating factors should be emphasized to the lender.

Income

Employment and Bonus Income Commissions Income Self Employment Investment

Interest Income

Debt

Credit Card Debt Auto Loan Debt Student Loan Debt

Personal Lines of Credit

Assets

Savings and Checking Stocks, Mutuals, Bonds

401k, Pension and Stock Options

IRA’s, Profit Sharing

Credit

New Accounts Closed Accounts Derogatory Accounts Inquiries

and Liens

 

The Pre‐Approval…Solidifies Your Home Buying Position

Once an applicant is prequalified, the next step is the preapproval. This involves the lender verifying one’s income, debt, credit, and assets. This is done by sending the lender 30 days of pay-stubs,

  •   W-2’s and 1040’s for the last two years
  •   Bank statements on all assets for the last two months
  •   Verification of credit by credit report
  •   A copy of your driver’s license

 

Once the preapproval is done, the buyer strengthens their buying position. Now, buyers have a “walking credit card” to purchase a new home! Buyers should never start their home search without being preapproved. The preapproval is usually valid for 90 days (sometimes longer) as long as the applicant’s income, debt, assets, and credit have not worsened or rates have gone up or loan programs have been eliminated.

October 20, 2019

 

Ref: Prequalification for John and Jane Doe                                           (Prequalification Sample)

 

To whom it may concern,

 

Based on the information provided to me, the above referenced client qualifies for the following:

 

Max Purchase Price Down Payment Loan Program PITI Payment Type of Property
$875,000 20% Fixed or Hybrid $4129/month Home

 

Notes: The PITI payment above is based on principle, interest, taxes and insurance based on a monthly basis. Usually you only pay principle and interest on a monthly basis.

 

Tax Benefits

 

As you may know, once you purchase a home, you are entitled to the tax benefits associated with

home ownership. Below you will find the purchase prices as stated above, that provide the approximate tax write off, net tax benefit, and net effective PITI payment associated with owning versus renting.

 

Purchase Price Tax Write Off Net Tax Benefit Net Effective PITI Payment
$875,000 $3308/month $793/month $3336/month

 

Notes: The above info can vary based on the actual rate, payment and household income of the borrower(s). For a more complete analysis of this benefit, please contact your CPA, tax planner or accountant.

 

Congratulations, you are now pre‐qualified. The next step is the pre‐approval process. To start this process, we will need to meet in person, and I will need you to bring the following with you:

  •   Copies of paystubs for the last 30 days.
  •   Copies of w‐2 and 1040’s for the last 2 years.
  •   Copies of bank statements for the last 2 months, for checking, savings, stock and 401k.
  •   Copy of driver’s license or passport.

 

Once you have put this list of items together, please contact me to schedule an appointment. Thank you for your time and interest.

 

Sincerely,

Rob McCarthy

Senior Mortgage Planner

October 20, 2019

 

(Prequalification sample) 

Ref:   Pre‐Approval for Home Financing

 

Dear John and Jane,

 

This letter is to inform you have been pre‐approved for the purchase price of $875,000.00 based on 20% down. Your credit, income, debt and assets have been reviewed and are satisfactory to the lender.

 

This pre‐approval is subject to the following conditions:

 

  • Review of preliminary title report from lender.
  • Review of appraisal of property per agreed contract price by lender
  • Review of purchase contract by lender

 

Should you have any questions, please feel free to call me. Thank you for your time. Sincerely,

Rob McCarthy

Senior Mortgage Planner