1. Getting a Reverse Mortgage for the Purpose of a Short Term Fix.

The cost of a reverse mortgage would normally make it a mistake to use for a short term fix. While there are definitely times to use it short term, think of a reverse mortgage as something you are going to use for the next 10+ years. In the event that you are in some serious financial dire straights, like possible foreclosure or in need of repairs to make your home habitable, it may make sense to do a short term reverse Loan. Being aware of the fees associated with the loan will help you determine whether or not you are making the smart choice. Of course, a trusted loan officer will be able to guide you, but ultimately, you need to be the one making the decision.

2. Losing Your Government Benefits Because of a Reverse Mortgage.

Not really because of getting a Reverse Loan, but because of the impact it can have on your finances. The program we are specifically speaking of is Medicaid. If you have too much money in reserve, you can be disqualified. The way this can happen is by taking a lump sum of money that is needed for something like home repairs, but you put in your bank account first. If you don’t spend it when the new month rolls around, you could cost your Medicaid eligibility. Another way is if you take a monthly allotment and don’t spend it all each month. This will be a savings that long term could equal enough money in your bank account to disqualify you.

3. Using an Inexperienced Loan Officer for Your Reverse Loan.

It may be hard to believe, but bank loan officers don’t have to be licensed or trained to the States standards. On the other hand, mortgage brokers have very strict criteria set by the State to be allowed to do loans for the public. Virtually anyone can be a loan officer at a bank and experience is not necessarily a requirement. You could walk into a bank, apply for the job, and be taking applications in a very short period of time. It may be a bit biased, but I would prefer to deal with someone that is a trained professional, one that is licensed and can be held accountable to the State. Since the commission that a loan officer earns can be pretty high, it can tempt the younger, less experienced ones to overcharge in the hopes of making a big payday.

4. Being Afraid of a Reverse Mortgage Loan, So You Don’t Do One.

Not knowing who to trust can be a cause of fear when searching for a reverse mortgage. You should never use someone you don’t feel you can trust completely. You are not required to use anyone just because you met with them for a short period of time. Make sure when you get your advice, that you get it from a source that knows what they are talking about. There is an article titled “Bad Advice From Good People about Reverse Mortgages” you should read. It will help you identify who to listen to. Basically, it talks about making sure the person giving the advice knows what they are talking about. A wall full of degrees doesn’t mean they know the details of the lending business. In other words your doctor is probably a very educated man, but would you go to him if you wanted stock advice? Another thing is; don’t disqualify yourself because you think you know the rules. It doesn’t hurt to talk to a mortgage professional and get their opinion.

5. Rushing Into the Reverse Mortgage Process.

While it is true that I could tell you everything you need to know about a reverse Mortgage Loan in about 10 minutes, I recommend letting it sink in after you gather the information. The rushing I am speaking of is when a loan officer is pushing you to do the loan. You need to do the loan when you are ready and understand what you are doing. Do it at your pace. Don’t let someone else dictate it. That said; I don’t want you to confuse the rushing with an efficient loan process. Once you have made a decision, the loan should take roughly 30-45 days to close. Usually once you have made up your mind, everyone involved wants to get it closed.

6. Thinking That Being Older Will Get You More Money.

The title says five, but here is a bonus one that came up. It is not always the best option to wait until you are older to get more money. When interest rates are as low as they are, it is more benifical to do your loan now instead of later. While it is true when you are a couple years older you will get more money available to you, this assumes the interest rate doesn’t change. On the other hand, if the rates go up, your age won’t come close to making up the difference you lose. A rate change of a 0.5% can make tens of thousands of dollars difference. A few years will make only a few thousand dollars difference.

Read more about reverse mortgages at Redwood Reverse Mortgage. David Prulhiere is the owner of Redwood Financial Services and specializes in reverse mortgage education and loans.

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