Reverse Mortgage: Basics A New Kind of Loan: In Reverse A "reverse" mortgage is a loan against your home that you do not have to pay back for as long as you live there. With a reverse mortgage, you can turn the value of your home into cash without having to move or to repay the loan each month. The cash you get from a reverse mortgage can be paid to you in several ways: • all at once, in a single lump sum of cash; • as a regular monthly cash advance; • as a "credit line" account that lets you decide when and how much of your available cash is paid to you; or • as a combination of these payment methods. No matter how this loan is paid out to you, you typically don't have to pay anything back until you die, sell your home, or permanently move out of your home. To be eligible for most reverse mortgages, you must own your home and be 62 years of age or older. Other Home Loans To qualify for most loans, the lender checks your income to see how much you can afford to pay back each month. But with a reverse mortgage, you don't have to make monthly repayments. So you don't need a minimum amount of income to qualify for a reverse mortgage. You could have no income and still be able to get a reverse mortgage. With most home loans, you could lose your home if you don't make your monthly payments. But with a reverse mortgage, there aren't any monthly repayments to make. So you can't lose your home by not making them. Most reverse mortgages require no repayment for as long as you — or any co-owner(s) — live in the home. So they differ from other home loans in these important ways: • you don't need an income to qualify for a reverse mortgage; and • you don't have to make monthly repayments on a reverse mortgage. "Forward" Mortgages You can see how a reverse mortgage works by comparing it to a "forward" mortgage — the kind you use to buy a home. Both types of mortgages create debt against your home. And both affect how much equity or ownership value you have in your home. But they do so in opposite ways. "Debt" is the amount of money you owe a lender. It includes cash advances made to you or for your benefit, plus interest. "Home equity" means the value of your home (what it would sell for) minus any debt against it. For example, if your home is worth $150,000 and you still owe $30,000 on your mortgage; your home equity is $120,000. Falling Debt, Rising Equity When you purchased your home, you probably made a small down payment and borrowed the rest of the money you needed to buy it. Then you paid back your traditional "forward" mortgage loan every month over many years. During that time: • your debt decreased; and • your home equity increased. As you made each repayment, the amount you owed (your debt or "loan balance") grew smaller. But your ownership value (your "equity") grew larger. If you eventually made a final mortgage payment, you then owed nothing, and your home equity equaled the value of your home. In short, your forward mortgage was a "falling debt, rising equity" type of deal. Rising Debt, Falling Equity Reverse mortgages have a different purpose than forward mortgages do. With a forward mortgage, you use your income to repay debt, and this builds up equity in your home. But with a reverse mortgage, you are taking the equity out in cash. So with a reverse mortgage: • your debt increases; and • your home equity decreases. It's just the opposite, or reverse, of a forward mortgage. With a reverse mortgage, the lender sends you cash, and you make no repayments. So the amount you owe (your debt) gets larger as you get more and more cash and more interest is added to your loan balance. As your debt grows, your equity shrinks, unless your home's value is growing at a high rate. When a reverse mortgage becomes due and payable, you may owe a lot of money and your equity may be very small. If you have the loan for a long time, or if your home's value decreases, there may not be any equity left at the end of the loan. In short, a reverse mortgage is a "rising debt, falling equity" type of deal. But that is exactly what informed reverse mortgage borrowers want: to "spend down" their home equity while they live in their homes, without having to make monthly loan repayments. There's more about this important concept in an article called "A 'Rising Debt' Loan" in the Basics section of this site. Exception Reverse mortgages don't always have rising debt and falling equity. If a home's value grows rapidly, your equity could increase over time. Or, if you only get one loan advance and no interest is charged on it, your debt would never change. So your equity would grow as your home's value increases. But most home values don't grow at consistently high rates, and interest is charged on most mortgages. So the majority of reverse mortgages end up being "rising debt, falling equity" loans. Rent N Sell Realty does not endorse any reverse mortgage lender or product. El MoMA celebra el centenario de 'Las señoritas de Aviñón' El Museo de Arte Moderno (MoMA) de Nueva York celebra con una exposición inaugurada hoy el centenario de la pintura 'Las señoritas de Aviñón', de Pablo Picasso, considerada como la obra que definitivamente cambió el curso del arte moderno. La exposición examina los orígenes de la obra que marcó un giro en la carrera del maestro español, al reunirla con nueve de los cientos de bocetos que realizó para su ejecución, prestados por colecciones públicas y privadas. "En retrospectiva, no ha habido otra obra que haya cambiado el curso del arte moderno y contemporáneo. Aunque se ha dicho que fue hecha con una espontaneidad salvaje, esta muestra confirma que fue cuidadosamente estudiada", dijo John Elderfield, comisario principal de Pintura y Escultura del MoMA. La exposición desvela cómo Picasso se obsesionó con estudiar cada figura desde distintos ángulos y en variadas poses, gracias a dos pinturas y una serie de bocetos pertenecientes a la colección del MoMA, el Museo Picasso en París y una colección privada parisina. "Picasso llenó al menos 16 cuadernos con bocetos y produjo cientos de dibujos y pinturas entre el invierno de 1906 y el verano de 1907, explorando la composición, las figuras por separado y en subgrupos, en una amplia gama de estilos y colores", dijo Anna Swinbourne, comisaria de la exposición. Uno de los bocetos revela que, en la concepción original de la escena, Picasso concibió un burdel con siete figuras, dos personajes masculinos y cinco prostitutas, que luego redujo a seis y finalmente a cinco mujeres. Sobre el lienzo, Picasso representó a las mujeres en su estilo "ibérico" o "estilizado" -un ejemplo del cual es la pintura 'Dos desnudos', de 1906, incorporada en esta exposición- y trabajó las cabezas hasta transformarlas en máscaras rituales africanas. Picasso mantuvo el proceso en completo secreto, trabajando durante seis meses en solitario, sin mostrar los bocetos o el progreso de la obra al público, aunque las visitas de algunos marchantes, críticos y amigos a su estudio siempre terminaban en conmoción. Artistas como Henri Matisse y André Derain se escandalizaron y reaccionaron con incredulidad, incomprensión, ira o burla, sin saber que cien años después ésta sería la pintura que gestó el Cubismo y otros ismos de principios del siglo XX, esto es, la modernidad. "Los historiadores de arte especulaban. Los bocetos apenas salieron a la luz en 1940 y no fue sino hasta 1973, después de la muerte de Picasso, cuando se revelaron todos los detalles de cómo la trabajó", dijo Swinbourne. Para el crítico de arte del New York Times, Michael Kimmelman, "si 'Las señoritas de Aviñón' no es la gran pintura del siglo XX, sigue siendo la más radical porque cambió el arte más que ninguna otra", al romper con las convenciones sobre belleza, armonía y coherencia estilística. La primera vez que se exhibió fue en un salón de pintura en París, en 1916, y después no se supo más de ella hasta su adquisición en 1924 por el coleccionista francés Jacques Doucet. En 1937, el fundador del MoMA, Alfred H. Barr, que la había visto en París, inició una campaña para adquirirla, lo que se concretó en 1939 cuando pasó a formar parte de la colección permanente del museo y se incluyó en una exposición en la primavera de ese mismo año. Si bien esta muestra es la primera en Estados Unidos en reunir la pintura con algunos de sus bocetos, este encuentro ya había ocurrido en los Museos Picasso de París y Barcelona, en 1988, toda una rareza considerando que las peticiones de préstamos que le llueven al MoMA son siempre rechazadas. Así, esta exposición en el MoMA es doblemente especial, porque en 2009 se cumplen 70 años de su debut en el museo. "La muestra revela cuáles fueron las rutas que Picasso decidió no tomar y nos enseña que ni él mismo sabía dónde iba a parar", explicó la comisaria. Las decisiones que tomó Picasso mientras pintaba la obra han sido desveladas en sus restauraciones, la última de éstas emprendida por el MoMA entre 2003 y 2004, un proceso que será mostrado al público en otra exposición que se inaugurará el 30 de mayo. En esa exposición se instalarán cajas de luz con rayos X de 1950 que muestran los cambios significativos en composición que hizo Picasso directamente sobre el lienzo, así como la documentación de la restauración y la cronología de los cien años de la pintura. Home Seller's Tips Here are some things to keep in mind when putting your home on the market. QUESTIONS: •What are the two most important rooms in your house (from a buyer's point of view)? •Should you spend a lot of money on remodeling before putting your home on the market? The answers are given later. As a seller, what you want to do is put yourself in the shoes of a potential buyer. It's important for you to see your house through the eyes of someone looking at it for the first time. The best way to do that is ask a friend or neighbor to come over and take a look at your home as if they were in the market. Many times, they will be able to suggest improvements that you would miss. A good first impression is important. A house's "curb appeal" is how it looks to someone driving up to it for the first time. That's why it's a important to have the landscaping and outside of the home in good condition. Clear up the clutter in front of the house. Make sure your lawn is mowed and the bushes are trimmed. If a buyer's first impression is favorable, they will want to look further. If their first impression is not so favorable, this will influence how they see everything else about your home. What can you do to make your house as desirable as possible? First we'll start with the simple things: •As stated, keep the lawn mowed and the yard free of clutter. •Keep the walkways and steps free of ice, snow, toys and leaves. •Turn your porch lights on when showing your home in the evenings. •Try to avoid having strong odors in your house - fresh baked cookies however, would be great! •Do not smoke - if possible try to do your smoking outside during the entire time that your home is on the market. You could actually loose a sale to non-smoking buyers. •Keep the drapes and blinds open. Let as much light into the rooms as possible. •Have flowers and greenery throughout the house. •Keep the temperature at a comfortable setting. •Have the fireplace on if it's a cold day, or the A/C on if it's a hot day. •Turn the television off and have soft music playing. •If possible, keep the kids and pets outside. •Clean your bathrooms and kitchen. •Don't leave dirty dishes around. •Keep your closets free of clutter. •Clean those easy-to-forget rooms like the garage, attic, basement, work area. •No dirty windows or mirrors. •The floors should be scrubbed and the carpets vacuumed. •And finally, don't interfere with the real estate agent showing your home. They know what to point out to the buyers. OTHER THINGS THAT YOU CAN DO TO INCREASE THE APPEAL OF YOUR HOME: •If it is needed, paint both the inside and outside of the house. It's best to use neutral colors. Fill the holes and cracks on the walls and ceilings. •Replace your old wallpaper if it is in bad shape. •Otherwise, just make sure the walls are clean. •Remove the stains in the sinks and the tubs. •Replace the tile in your bath and kitchen if needed. •However, most of the time, a good mildew remover and some grout will take care of unsightly tile. •Have your carpet cleaned. •Go around the house and tighten or replace missing door and cabinet handles. •If doors are hard to open and shut or they squeak, lubricate them. (Soap can actually work as a lubricant on drawers and doors.) •This is the time to have those cracked windows fixed. You can have the glass replaced at your local hardware store or glass shop. It's not as expensive as replacing the entire window. •Also, fix those leaky faucets and make sure the drains in your tub and sinks are not clogged. •If your hot water heater or furnace need replacing, do it. Add the cost into the price of your home. New buyers don't want the hassle right after moving in. This would also give them the option of financing the added cost - something they couldn't do after the sale. •Make the necessary repairs to your roof if it leaks. If there are water marks on walls or ceiling, cover them with a coat of paint after you make the repairs. •NOTE: You must tell the buyers about material defects on a property that would not be apparent during a routine investigation. •Check the fence on your property. Repair and paint it if necessary. •How about those cracks in your driveway? If it's blacktop, have it resealed. NOW FOR THE ANSWERS TO THOSE QUESTIONS: What are the two most important rooms to a buyer? •Number 1 is the kitchen. •Number 2 is the bathrooms(s). •This is why it's important to have both of these rooms in top condition. •Make sure your stove, refrigerator, dishwasher, and garbage disposal are in good working order. •Replace the floor and the tile on the walls - or at least make sure they look new. If your cabinets are in bad shape, get them fixed. •Replacing them may or may not be cost effective. (See the answer to the next question.) •For the bathroom: replace the shower curtain, clean the tile around the tub (grout if necessary), make sure there are no odors. Keep clean towels hanging. Should you remodel? For the most part, major remodeling will not be cost effective. In other words, you will probably not make back all of the money you put into it. The exception may be kitchen remodeling (in the $3,000 to $8,000 range). Here you may actually, see a 'profit' for your efforts. The next closest would be a bath addition ($10,000 to $12,000) and major kitchen remodeling ($15,000 to $20,000). Studies have shown that these two may not have a pay back of 100%, but they could be close. Of course, the more you spend, the least likely you'll be to make it up in price. This is especially true if these additional costs put your house way above the average price in your area. However, if selling your house fast is very important, any remodeling will help. Home buyers would rather see the home improvements than be told how much potential the home has. Other remodeling efforts that will probably not bring you a return on your investment: bath remodeling, family room addition, master bedroom suite, attic bedroom, a new deck, replacing your windows, replacing your siding, and adding a sun room. If you want to do these things, make sure you're going to be in your home long enough to enjoy them. Otherwise, leave them for the next owner. HOME BUYER'S TIPS: Here are some things to keep in mind when in the market for a new home. •One of the biggest mistakes that a home buyer can make is to continue to look for that "ideal" house while passing up perfectly good houses in the process. If this is your first house, chances are it will not be the last one that you will buy. As you delay your purchase, home prices will probably continue to rise and quite possibly, interest rates will too. •Having stated that, you should not rush into the biggest financial transaction of your life without careful consideration. •For this reason, we have highlighted most of the major items that you need to consider when looking to buy. With good planning, you can join the millions of other families who own their own homes and are taking advantage of the many benefits that are available to home owners. Starting with the obvious: LOCATION, LOCATION, LOCATION. •What kinds of things are important to you? •Will you be near stores, schools, parks, restaurants, theaters, supermarkets? •Do you mind being on a busy street or would you rather be on a quiet cul-de-sac? •Is the house near public transportation? •How far is it to work? PREFERENCES: Rate each of the following as: A - must have, B - high priority, C - medium priority, D - low priority. ___ Style of house - one story, two story, split level, etc. ___ Size of yard ___ Number of bedrooms ___ Number of baths ___ Bath in master bedroom ___ Eat-in kitchen ___ Separate dining room ___ Basement (Do you want a finished basement?) ___ Fireplace ___ Garage (1 car, 2 car) ___ Windows in the kitchen ___ Windows in the bathrooms ___ Plenty of sunlight in the other rooms ___ Maintenance free windows, gutters, trim, siding ___ Lots of closet space (walk-in closets) ___ Adequate storage (attic, crawl space, etc.) ___ Trees on the property and in the neighborhood ___ Children in the neighborhood ___ Air-conditioning ___ Type of heating system ___ Porch or deck ___ Dishwasher, garbage disposal ___ City water or well water ___ Septic system or sewers ___ Fuse Box or Circuit Breakers EXAMINING THE HOME: •Note: If any of the following items are unacceptable, it doesn't necessarily mean that you should not buy the house. You can negotiate the cost of the repairs and/or negotiate the price. Remember, there is no such thing as a perfect house. As any home owner will tell you, something is always in need of fixing or upgrading. What you want to do is protect yourself from any unexpected large expenses. You should also arrange for a home inspection to be made by a professional prior to your purchase. OUTSIDE: Do not just rely on your impression upon seeing the home for the first time. In looking beyond the "curb" appeal, you may be able to get a great deal on a home that can be enhanced with just a few improvements. Things like bushes that aren't trimmed or an unkempt lawn are two examples of improvements that can be made with a minor investment of time and money. The home inspector will point out some of the following items, but it's a good idea to be aware of them before you make an offer on a home. (The home inspector is normally contacted after an offer is made.) •Ask the age of the roof and whether it leaks. An old roof or one that has several layers of shingles can mean an expensive repair in the near future. A properly ventilated attic or crawl space will extend the life of a roof. (A roof can usually have 2 to 3 layers of shingles before it needs to be completely replaced.) •Check the gutters. Are they pulling away from the house? •Check the foundation. Look for signs of water or wetness in the basement. Vertical or diagonal cracks in the foundation are not usually serious, but horizontal cracks can be. •Windows and doors should open and shut easily. •Check the caulk around the windows and doors. •What's the condition of the siding? Will it need to be replaced soon? •Are the outside steps pulling away from the house? •How is the driveway? (Unless they are new, blacktop driveways will usually have some cracks. Look for major cracks and large pieces of missing blacktop.) •Is the landscaping in good condition? INSIDE: •What is the floor plan like? •Is it suitable for your family? •How about the room sizes? •Are they big enough ... or too big? •Check the water pressure by turning on several faucets at the same time, and flushing the toilet. •Check under the sinks for water leakage. •Check for signs of water on the ceiling and walls (stains and peeled paint). •Check the number and location of electric outlets. •Ask about insulation in the house. •Are there stains in the tub or sinks? •How old are the appliances and utilities (hot water heater, furnace, dishwasher, washer, dryer, stove, refrigerator, air-conditioner)? A furnace can last from 25 to 30 years. An air-conditioner will last for about 15 years. A hot water heater will last about 10 years. These are just estimates. The life span of any appliance depends on how well it was made and whether it has received proper maintenance. •Remember, if you like a home that is in need of repair, you can negotiate the cost of repairs and/or the cost of the home. Don't just walk away from a potentially good buy. FINANCIAL: •What are the average monthly utility bills? •How much are the real estate taxes? •Has there been an increase lately or is the area due for a reassessment? •Are there any major repairs needed in the near future? •Can you afford the monthly payments? Steps To Ownership Here is a summary of the steps that you will take from your home search to closing. If you are a first-time home buyer, don't be overwhelmed by the number of items listed or their complexity. Rent N Sell Realty as your real estate agent, attorney, and loan officer will guide you through this process. Many of the tasks are handled directly by these three parties. They will instruct you as to exactly what you must do and will answer any questions that you might have. Don't forget, they've gone through these procedures many times before. NOTE: All dollar figures listed in this section are estimates only and will vary due to many factors including which region of the country you live in. 1) Using the loan and pre-qualification determine the price range of the home that you can afford. Discuss this with Rent N Sell Realty agent. Ask him or her to show you houses in this range in the communities that you would like to live in. Your agent is a good source for inside information on the benefits of the communities in his or her area. For the most part, you should count on spending 2 to 4 weeks looking at homes with your real estate agent. This will give you enough time to look at plenty of homes and make your decision. If you take longer than a month, you risk the chance of loosing a home that you would have liked to make an offer on, and you'll have to start the process again. During this time period, it is also a good idea to get "pre-approved" for a loan. This is different than a pre-qualification. The bank or mortgage company actually does a credit check for a pre-approval. Having a preapproved loan gives you an advantage when making an offer in step 2. Ask your real estate agent to recommend a loan officer if you don't already have one. 2) When you find a home that you want to purchase, the next thing you do is make a bid through your Rent N Sell Realty agent. Your agent will provide you with a standard residential sales contract. He or she can also recommend a good real estate attorney. An attorney may or may not be necessary at this point, (most sales contracts are fairly standard) but will be required later in the process. However, you may decide that you want an attorney to review the contract. The sales contract will most likely contain some contingencies on riders attached to the contract. Examples of some contingencies are: your obtaining financing for a specified rate and term, selling your current home, obtaining a satisfactory (to you) home inspection. Your Rent N Sell Realty agent or attorney may include other items. This offer to purchase a home will be accompanied by earnest money of up to 5% or more, depending on the price of the home. This indicates to the seller that you are making a serious offer. The earnest money is normally in the form of a check made out to the broker, i.e. Rent N Sell Realty (not the seller). It is deposited in an escrow account and will be applied to your down payment. If the sale is not finalized for a reason beyond your control (ie. due to one of the contingencies), the earnest money will be returned to you. Subsequent offers and counter offers may take place until all terms are agreed upon by both parties. 3) Have the home inspected by a professional, bonded inspector. (NOTE: The buyer normally pays for the home inspection - it will run somewhere in the area of $200 - $500.) The home inspection usually takes place within 5 days after signing the contract. If there are any major flaws in the home, they can be dealt with before you apply for the mortgage. If these issues can not be dealt with to the satisfaction of the buyer, your contract should allow you to back out at this time. 4) Apply for a mortgage. NOTE: Check the loan/mortgage and mortgage prequalification functions provided in the software. You will probably have to pay a loan application fee of $100 to $300. Some lenders also charge you prepaid points. (One point refers to 1% of the loan amount. Points are paid to the lender or mortgage company to cover their cost for the up front processing of the loan.) You may decide to "lock in" the rate at this time, or the lender may allow you to do it at a later point in time. (If you have been pre-approved for a loan, some of the steps in this process will have already been completed.) When you apply for a mortgage, what are some of the items that are needed? (These may vary depending on the lender.) •Social Security cards & drivers licenses •Residence addresses for the past 2 - 5 years •Your landlord's name and address •Names and addresses of each employer (past 2 - 5 years) •Your most recent pay stubs •Two years signed tax returns & W2's •Names, addresses, account numbers, and balances of all checking, savings, credit cards, and installment loans •Two most recent bank statements on all accounts •Information on any stocks or bonds you own •Details of all real estate owned •Copy of fully executed sales contract, riders, and listing sheet for your current home (if applicable) •Divorce decree & child support agreements •Application fee 5) You will receive a "good faith" estimate of the closing costs from the lender. This is called a "RESPA Statement". It includes the costs for: points, appraisal, title search, title insurance, survey, recording of deeds and the bank's attorney fees. Some of these items may be included in the points that they charge. 6) At this time, there are several other items that may need to be done before the lender gives final approval to the mortgage: Title Search - This is usually required by the lender. It should be stated in the sales contract that the seller provide you with clear title (one without any liens against it). This may cost you about $200. Check with your real estate agent for the standard charges in your area. Title Insurance - The lender will also require this for their own protection. It's an insurance policy that covers any problems with the title even though the title company stated it was clear. Buyer's Title Insurance - This covers you, the buyer, in the event that the title is not clear. This is usually optional, but recommended. Private Mortgage Insurance - Again, this is something that most lenders require if your down payment is less than 20% of the purchase price. It is a protection for the lender in case you default on the loan. Homeowner's Insurance - This is an insurance policy that covers the cost of repairing or rebuilding your home in the event of a natural disaster. Obviously, this is beneficial to both you and the lender. This is something that you will shop around for on your own. You can start with your auto insurance company. Your realtor may also have some suggestions. With the exception of the homeowner's insurance, all of the above costs plus any additional ones such as the appraisal, survey, recording of deeds and the bank's attorney fees will be included in the RESPA provided by the lender. The entire cost to you, the buyer, will usually be in the range of $1,000 to $1,500 excluding points. (The actual amount may be higher or lower than these limits.) The amount of points that you will have to pay depends on the lender's policies, the amount of your down payment, the term and the amount of the mortgage. This means that you should count on having this much cash available besides the amount of your down payment and the amount of points paid to the lender. The down payment is usually a minimum of 5% to 10% of the selling price. So, how much will this cost? Let's take an example of a $150,000 home. Suppose your lender allows you to put a 5% down payment on the house, and your closing costs will be between $1,000 and $1,500, and the amount of points paid is 1.5% (of the loan). This would come to: Down payment $7,500 Closing costs $1,000 to $ 1,500 Points (1.5%) $2,138 ------------------ Total $10,638 to $11,138 7) If your mortgage is approved, the lender will send you a letter of committment. If the following information is not provided, you will request an exact accounting of the closing or settlement costs and the required documents that you will need to bring to the closing. 8) All of the parties will agree on a closing date. For the closing, here is a list of some of the items that the three parties are responsible to bring. The lender: RESPA, Truth in Lending Disclosure Statement, the mortgage, the mortgage note, application for any escrow accounts required for the buyer, and the check for the seller. The seller: property deed, final utility bills, final tax bills, any documents required to clear the title, and keys to the house. The buyer: cashier's check for the remainder of the down payment plus the balance due for any other payments (you will be informed of the amount), any documents required by the lender, you may need your check book for small dollar amounts, and you should have your lawyer present. 9) You will select a walkthrough date. This is your opportunity to inspect the home one last time before closing. It is usually scheduled a day or two before the closing date. 10) CONGRATULATIONS!!!!! Closing day has arrived. After signing numerous documents and taking care of final payments, you will become the proud owners of your own home.