Licensed Loan Officer (NMLS# 215395)
What is a Reverse Mortgage?
A reverse mortgage is a type of mortgage where the borrower does not need to make a monthly principal and interest payment.
Your mortgage balance will increase instead of decrease like in a normal mortgage.
There are different kinds of reverse mortgages.
The most common type is known as a Home Equity Conversion Mortgage or HECM for short.
Who are Reverse Mortgages for?
Reverse mortgages are for anyone 62 years or older.
If there is more than one borrower then we use the younger borrower's age for qualification.
You must occupy the home as your primary residence.
What Are the Steps to Getting a Reverse Mortgage?
The first step is a free consultation with your Loan Officer, Charles Mimnaugh.
In this consultation we will go over if you qualify and if a reverse mortgage makes sense based on your specific needs.
The next step is to do a required Home Equity Conversion Mortgage Counseling session with an approved counselor.
During this counseling session you will discuss the prospect of a reverse mortgage with a 3rd party counselor and they will issue you a certificate of completion if you both determine a reverse mortgage to be a good idea.
After counseling we do a complete application and order an appraisal to get your home's value.
Then we work on anything else we need to close your loan, including any FHA required repairs, insurance coverage, and other loan conditions.
Finally, after everything is satisfied to the lender, we close your loan and your mortgage payment goes away!
Can I Get Money From My Reverse Mortgage?
Yes, if you have sufficient equity we will cash out any equity we can in the form of a one time payment, monthly payments, or as a line of credit.
How Long Does the Reverse Mortgage Process Take?
Getting a reverse mortgage typically takes 30 - 45 days.
How do I Qualify for a Reverse Mortgage?
There are 2 primary factors in qualifying for a reverse mortgage.
Borrowers must be 62 or older. The older you are the more money you can qualify for.
Equity in your home. You need approximately 50% equity or more in your home to be able to qualify without needing to bring extra cash to the table. More equity means you will qualify for more money. You might be surprised what your home is worth in today’s market.
Does My Credit Score Affect My Qualification?
Credit scores do affect qualification. However, they do not carry the same weight or have the same effect as you would expect in a normal mortgage.
Borrower’s with lower credit scores will be required to carry a LESA (Life Expectancy Set Aside) to pay for their taxes and insurance. These accounts are similar to escrow accounts, however, LESA accounts can run out of money if the borrower outlives their life expectancy. In this case the borrower will then be responsible for paying their taxes and insurance.
What Happens When I Pass Away?
There are 2 things that can happen upon your passing.
Your heirs will have 30 days to inform your reverse loan servicer about their desire to buy your home. They can buy your home for the remaining loan balance or for 95% of appraised value in the case you owe more on your home than it is worth. Your heirs will have 6 months to sell your home, pay off the loan balance, or obtain financing. Your heirs will then get to benefit from any remaining equity.
If you have no heirs or any heirs decline to pursue acquisition of your home then the loan servicer will take possession and sell the home. The loan servicer will be responsible for any further expenses and will also keep any profit gained from the sale. As a note, loan servicers prefer heirs to purchase the home from them.
Do I Have to Pay Anything Towards My Home?
You do not have to make a monthly mortgage payment.
You do still have to pay for your property taxes, homeowner’s insurance, and any Homeowners Association Fees.
Can I Buy a House With a Reverse Mortgage?
Yes, you can buy a house with a reverse mortgage.
You will need approximately 50% down to qualify.
The down payment amount varies with age.
Do I Need an Appraisal for a Reverse Mortgage?
Yes, we will order a FHA standard appraisal on your home to determine your current home value.
Occasionnally, the lender will request a second appraisal if they find issues with the appraisal or they have doubts about the market at any given time.
Sometimes the FHA appraisal will discover issues with your home that we need to address before we can close.
Some repairs can be pushed to after close, but within a year, if they are not deemed a habitability issue.
Are There Upfront Costs to Getting a Reverse Mortgage?
While your initial consultation is free, we cannot proceed until you have taken a HUD approved counseling session.
These counseling sessions typically cost between $125 - $200. These prices are set independently by each counseling provider.
The counseling cost can be waived at the counselor’s discretion based on any claimed hardship.
We will provide you with a list of suitable counseling services.
There is also a fee for the initial appraisal and any subsequent appraisals if deemed necessary.
Does the Lender Own the Home?
No, the lender does not own the home.
You will retain the title and ownership during the life of the loan. You can sell your home at any time.
The loan will not become due as long as you continue to meet the loan requirements.
This means living in the home, maintaining the home, paying property taxes, and homeowners insurance.
Do I Pay Taxes on Any Proceeds?
Reverse mortgage loan proceeds are tax-free as it is not considered income. However, you should always consult a tax professional regarding your specific situation.