In todays lending environment, qualifying for a mortgage can be extremely difficult, even for the most savvy, financially sound borrowers, but, borrowers who struggle to document a lot of income are left with little to no options. In todays market, most seniors have at least explored the Reverse Mortgage option as a financial tool to try and offset the rising costs of retirement. For many senior homeowners, tapping into their most valuable asset, their home, is their best option. The Reverse Mortgage affords seniors to use the equity in their home to help ease the retirement burden they are often left with. Other than selling the home, their is no real way to use the equity that has been built up over the life of home ownership. A Reverse Mortgage is a great tool to use for any Senior homeowner trying to qualify for a non-traditional loan. The biggest drawback to the program tends to be costs affiliated with the Reverse Mortgage program. If exploring other lower costing options is in the cards, Home equity lines of credit or traditional mortgages are still available to the right borrowers.
What is the right borrowers? In a perfect scenario, the “right borrowers”, will have excellent credit, above 740, a good amount of equity in their home , below 60% Loan to value, and most importantly, documented income to carry a debt to income ratio below 40% of their gross income. Debt to income ratio is defined as personal finance measure that compares an individual’s debt payments to the income he or she generates. This measure is important in the lending industry as it gives lenders an idea of how likely it is that the borrower will repay the loan. Most lenders are somewhat flexible on debt to income ratio as it applies to your total debt (back end ratio).
When shopping for an alternative program for the Reverse Mortgage program, their are several loan programs that are available or comparable. A HELOC or Home Equity Line of Credit is usually a lower cost alternative that allows borrowers to only pay interest on funds used. The biggest drawback normally is the fact that most are of the ARM (Adjustable Rate Mortgage) variety and can change on a monthly basis in many cases. Other options include Conventional loans, FHA and even VA loans.
It is important to check around with different Lenders and Brokers as to what you options may be.