Reverse Mortgages

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For qualifying seniors, a reverse mortgage might be the right step

The Wife Forgot to Sign the Lease. May I Still Obtain a Credit Report?

BY CHARLES SCUTT CTW Features

Q: I’m a small landlord who owns several rental properties. I received a lease application from a couple, but after they left my office I realized that the husband signed the lease application form but the wife did not. May I get credit reports for both applicants since they’re married and obviously intended to sign the form?

MATERIALS: With building and remodeling becoming increasingly expensive, time consuming and anxiety producing, the search is on for durable, low-maintenance components.Wood is a smart choice, but one potential downside is that it may warp or shrink, depending on your climate, so be prepared by using the right stain and sealer, Krasne says. In Florida, he and Sunday suggest a highgrade urethane with a sea-coast tolerance. Other options for more extreme climates are metal-clad wood doors, laminated glass doors, which consist of two layers of glass with a plastic interlayer, and fiberglass doors.Also consider

THEY SAY YOU CAN’T TURN back the hands of time. But for seniors that qualify, you can turn back the terms of your mortgage so that your lender pays you instead of the other way around – a la a reverse mortgage. Essentially, a reverse mortgage is a special type of loan for older owners whose home mortgage typically is paid in full but desire to withdraw the equity from their home for extra money.A reverse mortgage can be a smart choice for seniors eager to reduce their bills and improve their quality of life – particularly older homeowners who don’t work, don’t want to sell their home to downsize to a dwelling that’s smaller or less costly, or aren’t eligible for a home-equity loan or line of credit. “Reverse mortgages can be valuable tools for some seniors who are trying to supplement their retirement incomes, especially in an age when pensions and Social Security may not cover living expenses,” says Andrew Housser, co-CEO of Bills.com, a personal finance resource center based in San Mateo, Calif. But reverse mortgages aren’t only alluring to house-rich, cash-poor homeowners looking to meet living expenses, says Steven J.J.Weisman, author of “Boomer or Bust:Your Financial Guide to Retirement, Health Care, Medicare, and Long-term Care” (Prentice Hall, 2006) and an attorney practicing in Cambridge, Mass.They’re also attractive to wealthier seniors who may wish to avoid capital gains taxes from the sale of their stock portfolios. To qualify, borrowers must be at least 62 years old, own their own home and have enough equity built up, says Scott Roberts, national account manager for World Properties

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A: No.You must have authority to obtain a credit report. No signature, no authority. Have the wife come back and sign a form that gives you permission to run a credit check and obtain other information, such as civil and criminal actions, rental histories, employment information, police and vehicle records, etc. Of course, you want to save the signed lease application in case anyone asks if you had the right to make such inquiries. Q: I own two properties in an area with rapidly slowing real estate sales. Since I’m a mortgage lender, my income is falling at the same time that the market is slowing. I’m now in the middle of a major squeeze with reduced income while carrying two properties – my home and an investment – and I’m concerned that I’ve bitten off more than I can chew. I contracted to purchase a single-family investment property two years ago when the market was terrific. The property has just been delivered. It has 100-percent financing, $600 a month in negative amortization and a second trust at 14 percent. The property is appraised for $95,000 more than I paid, about a 20percent increase. Should I rent or sell my investment property? I’m thinking of a quickie auction without a broker, but another local owner who tried this approach was not successful.

A: Your situation, unfortunately, is increasingly common nationwide.You’re a recent investor, which means the property has had little time to appreciate.You have a mortgage balance that is growing as a result of negative amortization and a market value that after a period of strong growth is now in decline. About that $95,000 in equity after two years: Is that real? Is that after marketing expenses? Does the appraisal reflect current market trends? If you rented the property today, what’s the best rent you could get? Would you break even on the property? Your market is precisely the wrong time to try and sell See ASK OUR BROKER, Page 2

Moving Forward in Reverse

Fits right in:The abundance of materials and finishes have made it easier than ever to let doors be the stylistic entrance into your home. Be it glass, fiberglass or wood, every style makes each door as unique as the homes they belong to.

No More Boring Doors Size and style are what’s ‘in’ for in-and-out BY BARBARA BALLINGER CTW Features

Doors provide entry, exit, privacy and security. But only in recent years, as houses have morphed into super-sized structures, have more homeowners been prodded to make their doors proportionally larger.With hurricanes lashing Southern coastal cities and ice and snowstorms hitting Midwestern and Northeast cites with a wallop, homeowners also look to doors to act as an energyefficient line of defense. But there’s another reason to take a closer look at your door choices, whether you build, remodel or decorate. More doors are available in more materials, styles and embellishments, all of which can alter your home’s cosmetic look and improve resale.As

you make New Year’s home resolutions, put doors near the top of your list of potential improvements. Here’s what to consider:

SIZE: Yup, it’s not your imagination.As food portions, cars and houses have gotten bigger, so have the architectural elements specified. Doors have been ramped up, with their heights expanded to as tall as 120 inches, up from more traditional sizes like 80 and 96 inches, say Mitchell Krasne and Curtis Sunday, partners at S&P Architectural Products Inc. in Pompano Beach, Fla.Widths, too, have been enlarged from 36 inches to 42 to 48, they say.And the thickness of doors also has been increased to match the larger scale, often doubling in size. One of your first decisions is to decide whether to

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go with readily available stock doors or more expensive custom ones.“Make that decision according to your budget and how passionate you are about a specific door,”Krasne says.

REVERSE Deck head goes here on two lines CONTINUED FROM PAGE 1 International, East Hartford, Conn. Only owner-occupied homes are allowed for reverse mortgages; the property must be the borrower’s primary residence.There are no income requirements, but loan candidates must meet with a counselor from an independent, government-approved housing counseling agency that must review the loan’s costs, financial fine print and alternatives with the potential borrower.The applicant may be eligible for a reverse mortgage even if they currently owe money on their home. According to Housser, the best candidates for reverse mortgages are “seniors with significant equity in their homes who are trying to supplement their retirement incomes. Because a healthy 62year-old could have a life expectancy of another 20 to 30 years and may not be able to borrow as much against the house with a reverse mortgage, however, this loan vehicle may be better suited for someone more senior. The individual also should be planning on staying in his or her home.” Reverse mortgages made for a fixed number of years “are useful for people who are particularly old, whose life expectancies are not long and whose income needs are great,”Weisman says. “Closed-end reverse mortgages also make sense for ‘younger-oldsters,’ who may have serious chronic medical problems that require continuing care but who may be able to receive this care in their own home.” Other plusses include the fact that reverse mortgage monies received (loan advances) are not taxable and that the borrower retains the home’s title; a government-backed reverse mortgage loan also will allow the borrower to live in a nursing home or other medical facility for up to one year before the loan becomes payable. There are several disadvantages that accompany reverse mortgages, however, including the fact that the interest owed compounds tremendously because the loan generally is not

repaid until the homeowner either dies or moves out of the home. Plus, the points, closing costs and other fees charged for this type of loan are considerably more than the fees charged for a conventional loan, says Weisman. Also, the loan comes due when the homeowner sells the house, moves out for 12 consecutive months or passes away.The home will not be left free and clear for heirs – they must repay the loan if they wish to keep the home, says Housser. “Reverse mortgages can be complex. It is critical for someone to understand the terms of the loan before signing, specifically if the mortgage is a tenure or term plan,” Housser says.“A tenure plan pays fixed payments until the person dies or moves from the premises.A term plan provides fixed monthly payments only for a determined amount of time.With the latter, the individual needs to have a plan in place for what to do after the term runs out. Under a tenure plan, the payments received may be very low; under a term plan, the homeowner may outlive the term.” There are two types of reverse mortgages to choose from: a government-backed home-equity conversion mortgage, also known as a reverse annuity mortgage, which represents 90 percent of all reverse mortgages, and a conventional reverse mortgage backed by a private lender or by Fannie Mae. Currently, the lending limit for HECMs is $362,790; Fannie Mae’s limit is $417,000; and private lenders often have no lending limit but charge more exorbitant loan fees. In general, the older your age, the more valuable your home, the less you owe on it and the lower the current rate of interest is, the more money you’re eligible to borrow. Weisman says that reverse mortgages now are offered by a broad range of lending institutions and are becoming more common. Experts recommend getting more information by calling the U.S. Department of Housing and Urban Development toll-free at 888.466.3487 or visiting www.aarp.org/money/revmort/ and www.hud.gov/offices/hsg/sfh/he cm/rmtopten.cfm.

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DOORS Today’s market is full of choices CONTINUED FROM PAGE 1 weather stripping, which can improve energy efficiency, he says. If you like the idea of allowing in fresh air when weather is nice, consider installing screens. In-swinging doors can be outfitted with permanent ones, says Krasne.

STYLE: You’ve got lots of choices to consider when picking the look of your door. First, do you want it to swing in, out or slide? Second, do you want a single or double door? You’re not done. Do you want it to consist of solid wood with one panel or more, all glass, or a combination of wood and glass? If you like the idea of a combination, decide whether you want the panes as sidelights, as a glass transom above, as ovals or as divided lights separated by grilles into smaller components.Also, decide if you want additional surface decoration such as carved wooden inlays or leaded glass. The overall trend is to embellish doors with a greater number of panels and more intricate wood or glass detailing. Knobs also have gotten fancier, with finishes in exotic oil-rubbed bronze, rustic dark-brown cast iron, handhammered Mediterranean or Tuscan styling or smooth satin or brushed nickel, says Sunday. Polished brass, once de rigueur, has lost ground, according to designer Judith Wilson of Judith Wilson Interior Design Group Inc., Studio City, Calif. In making your choice, try to match door styles and detailing to the style of your home.Yet, know that all doors don’t have to be the same, Krasne says.

WEATHER-PROTECTION FEATURES: Besides choosing the right material, other choices improve energy efficiency. Doors that swing outward can stop strong winds from pushing them in. Larger 2to 3-inch thresholds also help stop strong winds from driving water inside, says Sunday. Doors with a multi-point locking system keep the frame in place, but be prepared, though, that such features may add as much as 50 percent to the cost, he says.

INTERIOR DOOR TRENDS: While exterior doors help establish the curb appeal of a home, the interior doors can make a big design impact, too. One newer trend is for doorframes to reach almost to the ceiling, to increase the feeling of spaciousness.Wider interior doors also are in vogue. Some building codes require them to permit wheelchairs to roll through, says Wilson. When it comes to the material, consider a molded or pressed fiber door that is one-eighth-inch thick at the lower price end and a medium density fiber or slab door, or a solid wood one, both usually 1 3/8-inches thick, at the upper end, says David Winter, president and CEO of Interior Door Replacement Co., Mountain View, Calif. New design trends include using laminated glass so light shines through to darken hallways yet still afford privacy.The glass can even be colored, says Wilson.Again, consider the home’s architectural style or your furnishings. Knob and lever finishes on interior doors reflect the same trends that exterior doors do. Brass has become outdated – newer looks include oilrubbed bronze, polished chrome and satin nickel, says Wilson. Lowe’s offers a how-to guide for doors on its Web site, which includes a good glossary of door terms.

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Lowe’s How-to Guide for Doors With all that’s changing in the door world, it’s easy to get shut out. Luckily, Lowe’s offers a how-to guide for doors on its Web site, which includes a good glossary of door terms. To get there, select Buying Guides under the Project Center tab on the home page,

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Ask Our Broker CONTINUED FROM PAGE 1

without a broker. Let me explain: When you have a strong seller’s market, it’s easy to get buyers. Buyer demand pushes up prices and makes selling relatively easy. But you have a buyer’s market.There’s a shortage of purchasers. By not using the brokerage system, you’re excluding the very people who have what you need: a buyer. You’re concerned about the broker’s fee.That’s fair. But the broker’s fee is a minor issue compared to the real problem here. What you have is a real estate alligator. It will eat you alive if you don’t get rid of it. Right now you have equity in the property and monthly payments that if left unchanged can lead to bad credit, foreclosure and bankruptcy. In your situation, you should list the property with the most successful local broker you can find and offer a “seller contribution” to offset some or all buyer’s closing costs. No, this won’t be the world’s greatest real estate success, but, at this moment, you can get out of a dangerous financial situation with just a few bruises to the ego.That’s a cheap price to pay considering the potential for disaster that you face.

Q: Suppose a home inspection shows that an electrician and plumber are required to make repairs. Who pays, the buyer or seller?

A: To see who pays you first have to look at the inspection contingency.There are many ways to write a home inspection clause. For instance, there may only be a right to inspect the property but no obligation for the seller to make repairs, regardless of what problems are found. Another clause could require that the inspection must be “satisfactory” to the buyer. If the inspection is not OK, then the buyer can withdraw and get back his or her deposit. Or, the inspection language may say that if there are problems the seller agrees to pay X dollars for repairs. If the repair bill is bigger, then the seller has the right to say “no” and back out of the deal.In practice, the real issue may not be what’s in the contract; it may be whether the buyer and seller want to close the sale. In that case, one or both parties will step forward to make the repairs. © CTW Features Need real estate advice? Peter G. Miller, author of “The CommonSense Mortgage,” would love to hear from you. Send your questions to [email protected]

www.lowes.com. From there, click on Lumber & Building Materials, then select Doors and Windows from the Related Buying Guide. This provides a list of options that tells you all you need to know about Entry Doors, Storm Doors, Interior Doors, Garage Doors,Windows, and Blinds & Shades. © CTW Features