When Income Says “No,”
Home Equity May Say “Yes”

How do you solve life’s financial challenges when you don’t have enough income to qualify for a conventional loan?

Last week, I received a call from a client who had finally obtained permits to remodel his large home. He already had a home equity line of credit with his bank and asked them to increase it. Unfortunately, the bank declined his request because he couldn’t qualify based on his income.

The solution was surprisingly simple: a Reverse Mortgage Second.

Because of his age and the value of his home, I was able to arrange approximately $600,000—enough to complete the remodeling project without requiring monthly mortgage payments.

Then, this week, another former client called. He is going through a divorce and needed to pay his wife half a million as part of the property settlement. Again, qualifying for a conventional loan wasn’t possible. Once again, the answer was a Reverse Mortgage Second. We were able to secure $496,000, giving him  funds he needed while allowing him to keep his home.

These are just two examples of how home equity can become a powerful financial resource when traditional financing isn’t available.

If you—or someone you know—is over the qualifying age, owns substantial equity in a home, and needs funds but cannot qualify for a conventional mortgage because of income limitations, don’t assume there are no options.

Sometimes the answer isn’t earning more income—it’s making your home equity work for you. Give me a call. There may be a solution you haven’t considered.

Manny Kagan,
Your professional mortgage broker since 1983
(415) 225-7920; mannykagan@comcast.net

 

I’m Glad I Can’t Jog Anymore

I’m writing this from The Sea Ranch on the Sonoma Coast, about a three-hour drive from San Francisco. We came here on Thursday and left on Sunday. We have been coming here again and again for many years because every visit leaves us with unforgettable memories.

There are miles and miles of trails along the cliffs overlooking the Pacific Ocean. You can also walk down to the sandy beaches below, where the waves seem to wash away every worry.

Early this morning, Max and I were walking one of our favorite trails. Several men and women jogged past us. They were sweating, breathing hard, and focused on the path ahead. I thought to myself that jogging is certainly excellent exercise, especially in the fresh ocean air.

But then I realized something: I’m actually glad that I can’t jog anymore, because problems with my knees.

When I walk, I notice everything around me. I see the endless ocean stretching to the horizon. I admire the twisted cypress trees shaped by the coastal winds. I watch rabbits dart through the grass and deer quietly grazing nearby. I breathe in the fragrance of the sea mixed with wild grasses, and with every step I feel my spirit lifted.

Years ago, when I used to jog, the most enjoyable part was often the hot shower after I got home.

Today, Max and I walked for an hour. He happily ran along the beach while I slowly explored the beauty around me. When we returned to our rental home, I still enjoyed that refreshing shower—but the walk itself had become the greatest reward.

One of my favorite sayings is: “To serve — run. To live — walk slowly.”

As we advance in life, I believe we are meant to become wiser, not simply faster. Aging gives us the opportunity to exchange speed for awareness, rushing for gratitude, and movement for presence.

That is one of the 42 realizations I share in my new book, Aging Well Isn’t an Accident: 42 Realizations I Discovered Along the Way, which will soon be available on Amazon.

If this message resonates with you, you may also enjoy my companion book, 42 Petals of Wisdom, where my flower photographs are paired with reflections and observations gathered throughout my life. This book is now available on Amazon.

Three of the images above, along with the short reel available for download by clicking this link, were captured during the walk.

Have a wonderful life.

Walk slowly.

Notice the beauty around you.

A REVERSE MORTGAGE SAVED A FAMILY FROM LOSING THEIR HOME

In my book Retirement Solutions for Smart People, I describe many situations in which a reverse mortgage helped people who could not qualify for a conventional loan because of limited income or other financial circumstances. In every one of those cases, the goal was the same: to help people enjoy a more secure retirement.

Recently, I encountered a very different situation. The client was someone I had helped twice before, in 2001 and again in 2007. At that time, despite her limited income, I was able to find financing that met her needs. Today, her circumstances have changed dramatically. She is suffering from a serious disease and can no longer care for herself.

A few weeks ago, I received a call from her daughter, whom I had known for many years. She explained that her mother had two existing mortgages and that the payments had fallen behind. The home was already in pre-foreclosure. The situation was heartbreaking.

The house had accumulated substantial equity over the years. Four family members, including the mother, were living there. Selling the home was not the daughter’s first choice because she understood that, after her mother’s passing, the property would receive a step-up in tax basis, potentially eliminating a large capital gains tax. What the family needed most was time.

Unfortunately, there were many obstacles.

The mortgages were in the mother’s name. Because of not making mortgage payments, her credit score was only 570 and her income was  just $900 a month from Social Security.  Under conventional lending guidelines, there was virtually no chance of obtaining a new loan.

Fortunately, there was another solution.

Because the mother was over 62 and owned a home with significant equity, she qualified for a reverse mortgage. The reverse mortgage would pay off both existing mortgages, covered the delinquent payments that had placed the home in foreclosure, and provided an additional line of credit for future needs. Most importantly, it would eliminate the monthly mortgage payments giving the family the breathing room they desperately needed.

Even after more than four decades in the mortgage business, this case reminded me that every family’s circumstances are unique. Sometimes the solution is not obvious, but it does exist. Many homeowners believe they have run out of options simply because their income is too low or their financial situation appears impossible. If they have built equity in their home, there may be a solution they have never considered.

That is why I always encourage people not to wait until the last moment.

If you or someone you know is struggling with mortgage payments but has substantial equity in a home or condominium, give me a call. Together, we can determine whether a reverse mortgage—or another financing strategy—can provide the financial relief you need.

You may be surprised to discover that there is still a way forward.

Meanwhile please order on Amazon one of my books I wrote on the subject — Retirement Solutions for Smart People, which is also available on Kindle. And while you are there, you can also buy Reflection. The Healing Images.

I am grateful in advance.

Manny Kagan,
Your professional mortgage broker since 1983
(415) 225-7920; mannykagan@comcast.net

 

MASHA’S GARDEN

It was Sunday morning. I looked out the window and saw a beautiful blue sky. It looked like it was going to be a warm day in San Francisco.

Still in my pajamas, I walked out into our garden. When we bought our house in 1984, the backyard was just a barren hill with a cracked retaining wall and a small set of stairs leading down. It took us years to transform it.

One day, my wife’s mother, Mama Masha, who was living with us at the time, came home carrying a bundle wrapped in newspaper. While waiting for a bus, she had noticed it hidden in a bush. She picked it up and brought it home. When we opened it, we counted exactly $1,000.

At that time, we had many financial needs, but she said, “I want you to use this money to create your garden.”

Many years—and many thousands of dollars later—we now have a beautiful garden filled with mature trees bushes and flowers. Some we planted ourselves, while others seemed to appear on their own, as if they knew this was the right place for them to grow.

We all have choices about how we want to live and how we decorate our lives. For me, flowers are the essence of beauty. That’s why this afternoon I plan to visit a nursery and buy more summer flowers for our garden.

When we surround ourselves with beauty, our lives become more beautiful.

This is also why every morning and every evening I open my book, Reflections, and spend a few quiet moments looking at photographs of flowers. Their beauty fills my heart. It is how I begin each day and how I end it before going to sleep.

I encourage you to do the same.

You can find Reflections on Amazon. And if you ever want to experience extraordinary beauty in person, visit the San Francisco Botanical Garden. You will be amazed by its collection of flowers from around the world.

Until then, enjoy your life, surround yourself with beauty, and share it with your friends.

Three images accompanying this story come from Mama Masha’s garden.

HOW TO BUY A HOME IN COSTA RICA
WITHOUT SELLING YOUR U.S. HOME

Recently, I received a referral from an attorney I’ve known for some time. She and her wife had just returned from a trip to Costa Rica, and they had fallen in love with the country. After we discussed the client’s mortgage needs, she asked me a question. “Manny, how could we buy a home in Costa Rica?” I asked, “How much would you need?” “About $150,000.” I smiled and said, “That may be easier than you think.”

Because I had previously arranged the mortgage on their home, I knew they still had substantial equity. I suggested using a home equity loan, but she immediately replied, “I don’t want to put a second mortgage on our house.” “So where would the money come from?” I asked. She said, “My wife’s mother owns her home free and clear. She has plenty of equity, and she wouldn’t mind taking out a reverse mortgage.”

I explained one important rule: “A reverse mortgage requires the borrower to live in the home as their primary residence.” “She does,” my friend answered. “She’ll continue living there. She just wants to spend part of the year with us in Costa Rica.” That worked perfectly. As long as the home remains her primary residence and she continues to meet the occupancy requirements, a reverse mortgage may provide the funds they need.

The next step was simple. I checked the available equity online and prepared an illustration showing how much she could qualify to borrow. I sent them the proposal, and they were pleasantly surprised. Now she’s scheduled to complete the required counseling session. After counseling, there’s a mandatory seven-day waiting period before the loan documents can be signed. Then the reverse mortgage process begins. If everything goes as planned, my friends will soon own a home in Costa Rica—and they’ve already given me an open invitation to visit!

This story reminds us that there is often more than one way to achieve a dream. Many people assume they need to sell investments or take on new monthly mortgage payments. Sometimes, the equity already sitting in the family home can make those dreams possible.

So, the next time you’re thinking about buying a vacation home, retiring abroad, or helping a family member purchase property, don’t assume it’s out of reach. There may be financing solutions you haven’t considered.

Sometimes, the key isn’t finding more money—it’s finding a better strategy. Contact me today, and I will help to find the one that  works best for you.

I LOVE THE UNITED STATES

I was born in Latvia when it was part of the Soviet Union, a system built on socialist principles. That system lasted for about 70 years before it collapsed.

Today, I feel truly blessed to live in the United States of America. Just say those words out loud: United States of America. The first word is united. For nearly 250 years, this nation has remained united through wars, natural disasters, economic crises, and many other challenges. Time and again, Americans have come together and overcome adversity.

My wife,  I and our family came to this country in 1980. For the past 46 years, I have lived here, worked here, loved here, prospered here, and had the privilege of helping many people achieve their dreams. I have met people from all over the world, and they, too, are grateful to call America home.

Yes, our country has challenges, but every challenge is also an opportunity to grow stronger. That is the American spirit. As we celebrate our nation’s 250th year, I simply want to say thank you to this wonderful country.

I feel honored and grateful to be an American, and I wish you and your family a happy, safe, and joyful celebration.

Three images illustrating this story show how some people express their patriotism.

Enjoy and share.

BUY YOUR NEXT HOME
WITH A REVERSE MORTGAGE

Many people think of a reverse mortgage only as a way to access the equity in a home they already own. What many don’t realize is that it can also be an excellent way to purchase a new home.

I recently helped a client who is about my age. He is retired but still earns some income as an attorney, in addition to receiving Social Security. After selling a property he had owned with a partner, he wanted to buy a home of his own.

He explored several options, including a tenancy-in-common (TIC), a DAC, and even paying cash. The problem was that his income was too limited to qualify for a conventional mortgage, and he didn’t have enough cash to purchase the home outright.

The solution was a Reverse Mortgage for Purchase.

He easily qualified for a loan large enough to buy the property, and he even had funds left over after closing. Like other reverse mortgages, this program offers several payout options. Borrowers can choose to make monthly mortgage payments or not. Most people choose not to make monthly principal and interest payments, allowing the loan balance to increase over time.

Some people worry that this will leave less equity for their heirs. That may be true, but it also allows parents to enjoy their retirement without the stress of making monthly mortgage payments or wondering where the money will come from.

As with every reverse mortgage, the borrower must complete a mandatory independent counseling session, followed by a seven-day cooling-off period before the loan process can begin. Even with these requirements, we can often close the purchase in about 30 days.

I wanted to share this story because many real estate agents are still unfamiliar with this program. A Reverse Mortgage for Purchase can help many retirees buy the home they really want, even when they don’t qualify for conventional financing.

If you have questions about whether this program could benefit you or one of your clients, I’d be happy to help.

You can also learn more by reading my book, Retirement Solutions for Smart People, available on Amazon, where I explain reverse mortgages and many other retirement financing strategies in greater detail.

If you have questions about reverse mortgages or would like to discuss whether one might be appropriate for your situation, please give me a call.

Manny Kagan,
Your professional mortgage broker since 1983
(415) 225-7920; mannykagan@comcast.net

HONOR YOUR FATHER

I am writing this story on the third Sunday in June, which, according to my calendar—and a reminder from my wife—is Father’s Day.

The idea for this holiday began in 1910 when a woman named Sonora Smart Dodd decided to honor her father. After her mother died, he raised Sonora and her five siblings by himself. It took until 1972 for President Nixon to sign Father’s Day into law as a national holiday. But the idea of honoring fathers started much, much earlier.

More than 3,300 years ago, when the Torah was given to the former slaves, after they left Egypt, the Fifth Commandment instructed us: “Honor your father and your mother.” It comes immediately after the commandment to keep the Sabbath. This teaching is repeated again in the Torah.

So, what does it mean to honor your father and mother? Do we need to wait for one special day each year? Is it an obligation, a duty, or a feeling that comes from the heart? After all, your father and mother gave you life. Isn’t it natural to honor them?

My father passed away many years ago. During the later part of my parents’ lives, they lived in Israel while we were here in San Francisco. Every Sunday, I would call them and ask how they were doing. My father would tell me what happened during the week.

One day he told me he had gone to the doctor. I asked what the doctor had said. “The doctor told me I don’t have it,” my father replied. “Don’t have what?” I asked. Then, I heard him asking my mother: “What doctor said I don’t have? “Dementia,” she said.

It sounds almost like a joke, but I still smile when I remember that conversation. I miss those Sunday calls. When Sunday comes around, I often think about them.

You don’t have to wait for a special day once a year to honor your parents. If you are fortunate enough to still have your father around, think about him. Give him a call. Ask how he is doing. You will both feel better afterward.

By the time you read this, Father’s Day will already be over. But it is never too late to honor your father—and your mother.

Three images inside this story show you different fathers.

Happy Father’s Day, every day!

WHAT IS A DSCR LOAN?

DSCR stands for Debt Service Coverage Ratio. It is a type of mortgage that qualifies a borrower primarily based on the rental income generated by the property rather than the borrower’s personal income.

I recently closed a loan for a client whose mother had passed away. He and his brother inherited her home. One brother wanted to keep the property, so he needed a mortgage to buy out his sibling’s share. The challenge was that his personal income was not sufficient to qualify for a conventional mortgage.

The solution was a DSCR loan.

Since the inherited property was going to become a rental, the lender focused on the property’s income potential. The borrower provided a lease agreement showing the expected rent. In addition, the lender ordered an appraisal that included a Form 1007, which analyzes market rents for similar properties in the area.

The lender then compared the expected rental income to the property’s monthly expenses, including principal, interest, property taxes, and insurance. If the rental income is sufficient to cover these costs, the borrower may qualify regardless of personal income.

Some DSCR programs are even more flexible. In situations where the rent does not fully cover the payment, certain lenders may still approve the loan, although the interest rate is usually higher.

This can be especially useful when purchasing a multi-unit property where some units are vacant. Even though current rental income may be insufficient, the lender can use the market rent analysis from the appraisal to estimate future income.

DSCR loans can be used for:

• Purchasing rental properties
• Refinancing existing loans
• Cash-out refinancing
• Single-family homes
• Two-to-four-unit properties
• Multifamily properties with five or more units
• In some cases, second mortgages on investment properties

As I often tell my clients, there is usually a solution to every financing challenge. The key is finding the right loan program for your specific situation.

If you have a financing need involving rental property, inheritance, refinancing, or investment real estate, let me know. I will do my best to find the right solution for you.

Manny Kagan,
Your professional mortgage broker since 1983
(415) 225-7920; mannykagan@comcast.net

HOW TO SLOW DOWN?

This question was asked of me by an 87-year-young friend.

We first met because he became my client. One day he came into my office to discuss borrowing some money. He owns his home and a rental property. He used to be a doctor, but what is remarkable about him is that he is also a pilot. He owns two airplanes and still flies regularly. As we talked, I asked him about his life. He drives an electric car, and when he travels longer distances, he has to stop for about an hour to recharge it.

“So, what do you do while the car is charging?” I asked. He smiled and said he writes. In fact, he is writing a book.

Later, we talked about getting together again. Friday would not work because he was going dancing. Saturday was impossible because he was singing together with his girlfriend in a group. Sunday he was going to church. Besides that, he flies his planes, works on maintaining his property, and keeps himself busy with countless other activities.

Then he asked me, “What’s your recommendation? How do I slow down?” I laughed and told him, “I don’t have a recommendation because I don’t slow down either. I keep moving and I keep doing things as long as I can.”

My belief is simple: as long as you are doing things, learning, creating, helping others, dancing, singing, flying, writing, or simply enjoying life, it means you are alive.

So, if you ask me how to slow down, I don’t have an answer. My answer is to keep going for as long as you can. Stay healthy. Stay active. Stay curious. If possible, stay wealthy. But most importantly, enjoy life.

This version emphasizes the contrast between my friend’s age and his active lifestyle, making the ending more impactful. He invited me to fly with him, but my wife didn’t think that this was a good idea.

Three of the aerial photographs you can see above were captured from commercial flights on which I was a passenger.

Enjoy and share.