Reverse Mortgages
What is a Reverse Mortgage
A reverse mortgage is a loan available to homeowners, 62 years or older, that allows them to convert part of the equity in their homes into cash. The product was conceived as a means to help retirees with limited income use the accumulated wealth in their homes to cover basic monthly living expenses and pay for health care. However, there is no restriction how reverse mortgage proceeds can be used. The loan is called a reverse mortgage because instead of making monthly payments to a lender, as with a traditional mortgage, the lender makes payments to the borrower. The borrower is not required to pay back the loan until the home is sold or otherwise vacated. As long as the borrower lives in the home he or she is not required to make any monthly payments towards the loan balance. The borrower must remain current on property taxes, homeowners insurance and homeowners association dues (if applicable).
Buying a Home with a Reverse Mortgage
In 2008, Congress authorized the Home Equity Conversion Mortgage (HECM) for Purchase program, under which seniors can buy a house and take out an HECM Reverse Mortgage at the same time, incurring only one set of settlement costs. Over the past few years, the product has been significantly strengthened to insure it is the right fit for a prospective home owner. A Reverse Mortgage purchase allows you to purchase a home with flexible payment terms. Home owners may choose to make their monthly payment at virtually any amount, or make no payment at all.
Steps to Obtaining a Reverse Mortgage
- Education
- Application
- Independent HUD counseling session
- Financial assessment
- Appraisal
- Processing / Underwriting
- Closing
- Disbursement
No loan repayment is required as long as the borrower owns and lives in the home.
- There are limited income, asset, and credit requirements
- The homeowner retains title and ownership of the home
- Cash advances can be used for any purpose
- Borrower is responsible for property taxes, homeowners insurance, HOA dues and general upkeep of the home.
What can I use the money for?
- Pay off current mortgage or debts
- Property taxes/ home insurance
- Home repairs
- Everyday living expenses
- Retirement Planning
- Medical expenses or in-home care
How can I qualify?
- Any homeowner who is 62 years or older
- You must be living in the home as your primary residence
- Borrower’s must have sufficient equity and meet residual income standards.
- Borrower’s must meet minimum credit standards.
How much money can I get? The amount you can get depends on:
- Youngest borrower’s age
- The home value
- Current interest rates
- The HUD loan limit in your area
How is it paid to me?
You can choose how to receive your money.
You can receive it:
- As a Lump Sum at the closing of the loan
- As a Monthly Cash Advance
- As a Line of Credit
1.
Get Pre-Approved
This is the time to get in the know. A pre-approval will give you an advantage when you find your perfect home. We can tell you what you need to get pre-approved, so you know the exact loan amount you qualify for, what your monthly payment will look like, and how much taxes and insurance will be. With a pre-approval, the loan process will be smoother and your offer will be stronger.
2.
Loan Application
Your application will provide a complete picture to loan investors of your assets, debts and what you are buying. It will take into account documents such as pay stubs, proof of income, tax returns, employment history, and information on all debts, assets, and sources for down payments. Don’t worry, we will request these documents as applicable for your loan application so that you can be fully prepared.
3.
Select Your Loan Program
Fixed rate? Adjustable? FHA? There are multiple loan options that may fit your unique needs, and we can help you choose. Are you looking for the consistent rates and payments that a fixed rate loan can provide? Do you want the short-term benefits of lower rates that an adjustable rate loan can bring? Our extensive portfolio of loan options means you have more options available to get just what you need.
4.
Processing and Underwriting
Your loan has specific investor guidelines that must be met, and an underwriter will review your documents to be sure that you meet them. While an underwriter reviews your file, an appraisal will be ordered on the home. Additional information may be requested, so don’t panic if you have to turn in more documents. That’s just the underwriter working hard to get your final approval.
5.
Loan Approval
Before your loan is approved, you will receive pre-approval and a list of closing conditions that need to be met. These conditions can include verification that your employer is current and proof that homeowner’s insurance has been obtained. Once closing conditions have been satisfied, the underwriter issues a clear to close. Congratulations, your loan has been approved!
6.
Close the Loan
With an approved loan, you are on the home-stretch towards closing. The lender will send closing documents to a title company that draws up paperwork and arranges for signing of documents. Once the documents have been signed and funding conditions have been met, the title is recorded and the process is complete. You are a proud owner of your new home, and the keys are yours!
