Each reverse mortgage borrower must undergo a financial assessment. This is conducted by the lenders and is done for the purposes of assessing whether or not the potential borrower can afford to maintain living expenses and keep current with the payment of all homeowners insurance, property taxes and other fees over the loan period. All income sources are reviewed including pensions, social security benefits, investment income and other sources. Bank account statements and tax returns are also used in these assessments. Credit scores are also reviewed and if there are issues, there is room for explanation of extraordinary circumstances when determining credit worthiness for reverse mortgage loan approval.
After compiling income streams and projected expenses, the residual income amount is determined. This is the amount of money that is leftover after all expenses are paid in a month. It is compared with the established amounts which are based upon the size of the family and the region of residence to determine whether or not the borrower(s) have a high enough residual income to pass the assessment for eligibility.
Failure to pass the financial assessment can result in a decline on the loan application. If the borrower(s) pass the assessment, they may move to the next step to get the loan. In cases where the borrower(s)’ cash flow is inadequate to meet the eligibility for loan criteria, the majority of loan proceeds can be placed in a special fund called “Life Expectancy Set-Aside” to be used for the sole purpose of paying homeowners’ insurance, property taxes and other associated real estate fees until the funds are exhausted.
It may seem like its a complex process but its not, here at Reverse Mortgage in Rancho Cucamonga, we are dedicated to ensure that you are first educated on every aspect of this loan process, and then we will guide through every step of the way, structuring your loan in a way that will be the most beneficial for your specific scenario.