A reverse mortgage is a unique, Federal Housing Administration (FHA)-insured loan that allows eligible homeowners age 62 years and older to convert a portion of their home’s equity into tax-free funds without having to make monthly mortgage payments.
A reverse mortgage loan can help:
HUD certifies housing counselors around the country to give homeowners impartial education about reverse mortgages. Reverse mortgage counseling is a mandatory part of the reverse mortgage application process and is typically completed just before or after completing an application for a reverse mortgage. Reverse mortgage counseling can be done over the phone with one of the national counseling agencies or it can be done face-to-face with a regional agency.
After the counseling session, the counselor will mail a signed copy of the HECM Counseling Certificate to the homeowner. This certificate is presented to the lender with the reverse mortgage application.
In the event of death or in the event that the home ceases to be the primary residence for more than 12 months, the homeowner’s estate can choose to repay the reverse mortgage or put the home up for sale.
If the equity in the home is higher than the balance of the loan, the remaining equity belongs to the estate.
If the sale of the home is not enough to pay off the reverse mortgage, the lender must take a loss and request reimbursement from the FHA. No other assets are affected by a reverse mortgage. For example, investments, second homes, cars, and other valuable possessions cannot be taken from the estate to pay off the reverse mortgage.
If the borrower leaves the home to a family member, the family member then has the option to either pay off the existing loan balance, or sell the home and keep the difference. The inheritor does not assume responsibility for any debt, nor ever has to pay off the existing balance from the reverse mortgage.
The application process for a reverse mortgage can be broken down into 5 simple steps. The most important part of the application process is the desire to do it. I can't stress that enough. The more willing you are to comply to what is needed, the easier the process will be. Often times, I see borrowers take the "i'll get to it approach" and draw out the process for entirely too long. This can be ok, however the reverse mortgage program is constantly changing and it's tough for the lenders to actually keep up with the ever changing demand. Often times, the programs or criteria of a reverse mortgage will change during underwriting and the majority it doesn't get more lenient.1. Application
The consumer fills out application for reverse mortgage with the lender, and selects the product and payment options:
Reverse mortgage counseling is a mandatory part of the reverse mortgage application process and is typically completed just before or after completing an application for a reverse mortgage. Reverse mortgage counseling can be done over the phone with one of the national counseling agencies or it can be done face-to-face with a regional agency.3. Appraisal
An appraisal is ordered through a certified appraisal management company (AMC). The appraiser schedules a time at your convenience to inspect the property. The appraiser completes the report then sends it to the AMC, which in turn sends it to us.4. Processing and Underwriting
Title work, lien payoffs, etc is ordered and packaged with the application, counseling, and appraisal in order to send to the lender for conditional approval.5. Closing
Upon completion of the conditions the loan is ready to close. All reverse mortgages have a 3 day right of recission. You will have 3 days after the signing to change your mind and close the loan. After the recission period, funds are dispersed to the method you disclosed at the closing.
There are several types of Reverse Mortgages. Each product is slightly different in the way the borrower is able to qualify and / or receive their money. The types of reverse mortgages are itemized below.HECM Fixed
Fixed Rate Mortgages allow borrowers to access the most money from their reverse mortgage. This is typically the best option for those who may need to pay off large debts.
The HECM Libor is an adjustable rate reverse mortgage. This option allows for the most flexibility with reverse mortgage proceeds.
The HECM Saver allows the borrower to keep more money in the equity of the home while eliminating some of the hefty fees associated with a reverse mortgage.HECM Fixed Rate Advantage
This fixed rate HECM Reverse Mortgage is available to retirees age 62 or more and is fully compliant with all FHA guidelines. The borrower simply draws their maximum available principal limit at closing (60% or higher with mandatory obligations) then automatically draws the rest of their available funds 12 months later. This means borrowers gain access to maximum proceeds coupled with the peace of mind of a fixed rate!
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