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Niceville, Florida

Once known as Boggy Bayou, Niceville sits next to Choctawhatchee Bay on Florida's western Panhandle coast. Henderson State Park, about 13 miles away, has sugar white beaches, a boardwalk and camping areas. Three more beach parks are within a short drive.

Previous Issue

Edisto Beach, South Carolina

Diminutive Edisto Beach sits on Edisto Island at the mouth of the Edisto River on the southern South Carolina coast. Surrounded by marshland, Edisto State Park and the sea, Edisto Beach is a quiet seaside hamlet and home to four miles of pristine, white sand oceanfront beaches.


How Did Reverse Mortgages Get a Bad Reputation? Is it Warranted?

A reverse mortgage can be a sensible part of any retirement plan if you understand the risks and rewards. Yet, this type of mortgage has gained a bad reputation over the years. Why?

One, they provide the temptation to quickly deplete your asset base, leading to financial issues later down the road.

It is true that this can happen if you are not used to receiving large lump sums of money. But if you are financially literate and plan carefully, just as you do with your other asset distributions, then chances are that you will not spend through the money too quickly.

Two, reverse mortgages are often misunderstood. Many people think that obtaining one means giving up the deed to your home. Others worry about a non-borrowing spouse having to leave the home if the borrowing spouse dies. Still others believe that you can become "upside down" with a reverse mortgage, meaning that you, or your heirs, will evenutally owe more than the house is worth.

None of these are true. You keep ownership of your home when you have a reverse mortgage, just like you do when you have a regular mortgage. A simple solution to one spouse having to leave the home if the other dies is to have both spouses listed as borrowers. It is possible that your mortgage balance will outgrow your home's value, but the good news is that reverse mortgages are non-recourse loans and are guaranteed by the FHA and HUD (the only reverse mortgage insured by the federal government is called a Home Equity Conversion Mortgage (HECM)). This means that even if your home is "upside down" when you die, your heirs can not be held responsible for the shortfall. Ever.

It is true that reverse mortgages are usually more expensive than regular mortages, and some loan officers are compensated based on the amount of money you take out. For this reason, it is a good idea to work with a loan originator who is not compensated based on the initial lump sum amount taken from the loan. HUD also has a list of reverse mortgage counselors, not loan officers, who can answer your questions about this type of loan to see if it is a good fit for you.

Mortgages for Retirees

As people live longer and finance rates are at historic lows, more and more retired folks are considering obtaining a mortgage rather than paying cash for a new home. You are never "too old" to get a mortgage, thanks to the Equal Opportunity Credit Act, as long as you have the means to do so.

Having said that, retirees face some unique challenges when it comes to qualifying for a mortgage. Most mortgage lenders will look at the same criteria as they would for a young first time homebuyer, including your credit history, debt to income ratio and monthly income. The good news is that Social Security benefits and distributions from 401(k)s, IRAs, and other retirement accounts count as income.

However, because retirement accounts become depleted over time they have a defined expiration date. As a result, a mortgage lender will want to know that the distribution income will continue for at least three years after the date of the mortgage application.

It is also important to keep in mind that if your retirement accounts consist of stocks, bonds, or mutual funds or other "volitle" investments, mortgage lenders will only use 70% of the value in the retirement accounts to determine your mortgage qualifcation.

And while Social Security counts as income, if you are drawing on a family member’s record, such as survivor benefits or spousal benefits, then the income must be documented as payable for at least three years from the mortgage application date.

If you cannot qualify for a traditional mortgage, then a reverse mortgage might be an option. Fannie Mae and Freddie Mac also have programs that can make home buying easier. Check with a reverse mortgage lender or these goverment agencies to see loans and programs available to you.

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