Just Approved: Property improvements produce dream reverse mortgage result for Richmond homeowner
Loan officer: John Holmgren, Holmgren & Associates.
Property type: Single-family home in Richmond.
Appraised value: $584,000.
Loan amount: $317,662.
Financing terms: Annual FHA HECM reverse mortgage; 3.923%.
Backstory: My client had purchased her home 15 years ago and had recently retired. She was having trouble affording her living expenses, including the mortgage, and expressed concern to her friend and real estate agent that she could not afford to remain in her home. The friend suggested she call me to explore options for areverse mortgage.
Based on the friend’s estimate of home value, which was generally supported by the Zillow estimate, the homeowner would have to bring in more than $25,000 to bring her loan balance down to qualify for a reverse mortgage. It is not intuitively obvious how reverse mortgage eligibility works: it is based on home value and age of homeowner, not such traditional metrics as loan-to-value and credit score.
I visited the client at her home and confirmed that based on her income and credit history she would qualify very comfortably. I also identified a number of deferred maintenance items that could be corrected, probably at minimal cost, to make a difference in an appraiser’s perception of the property. While she had the ability to draw funds from her IRA to pay any shortfall in the funds available in a reverse mortgage, she decided to take my advice and make the suggested improvements.
The appraisal result exceeded both of our expectations, coming in well above the amount needed to avoid a cash contribution from the client and, moreover, enough to provide her with an additional line of credit of almost $15,000 for future needs.
This episode illustrates the value that can be derived from working with a local, hands on loan...