MEETING YOUR REAL ESTATE NEEDS
Top Ten Q & A about Reverse Mortgages
1. What is a reverse mortage?
A special type of loan that lets a homeowner convert a portion of his/her home equity into cash that can be put into use today, without the necessity of selling the home or moving. No repayment is required until the borrrower/s no longer use the home as their principal residence.HUD's reverse mortgage provides these benefits and is federally insured as well.
2. Can I Qualify?
You are eligible if you (borrower) is 62 years of age or older; own your own home outright, or have a moderately low balance on your present mortgage that can be paid off at the closing with proceeds from the reverse mortgage, and you must reside in the home. You are further required to receive consumer information from HUD-approved counseling sources prior to obtaining the loan.
3. Are there up-front costs involved with this loan?
Yes, you will finance closing costs, which are paid back if the loan is ever repaid. FHA requires a mortgage insujrance premium (MIP) equal to 2 percent of the value of your home (or the FHA lending limit, whichever is less.) In addition, a loan origination fee, appraisal fee,title insurance and other necessary fees charged at loan closing. These fees are not necessarily paid out of pocket. FHA allows lendes to charge an application fee and to collect that fee at time of application. Not all lenders charge the application fee.
4. How do I know if my home is eligible?
It is eligible if it is a: single family dwelling, a one to four unit dwelling that you own and occupy ( or intend to purchase and occupy), a toenhouse, a detached home, condominium unit (must be FHA-approved) or a manufactured home on it's own land, and was constructed on or after June 1976. It is possible for a non-approved condominiums to qualify under the Spot Loan program. It must be in reasonable condition & meet HUD minimum property standards. Required home repairs, in most cases, can be made after closing and paid for from loan proceeds.
5. How is a Reverse Mortgage different from a Bank Home Equity Loan?
With an Equity loan, (traditional mortgage or equity line of credit), you must have sufficient income vs debt ratio and credit rating to qualify for the loan, and you are required to make monthly payments until the loan is paid. The reverse mortgage differs in that it pays you, and is available to use regardless of your current income or credit rating. The amount you can borrow depends upon your age, the current interest rate and the appraised value of your home or FHA's mortgage limits, whichever is less. You don't make payments as long as the home is your principal residence. You will still be required , as all homeowners are, to pay all taxes, insurance and utilities, but with a FHA-insured HUD Reverse Mortgage, you cannot be foreclosed or forced to vacate your home because of "missed mortgage payments".
6. What personal information do I need to provide?
The only documentation needed at the time of application is picture identification (which shows a birthdate, such as driver's license or state of federal ID card) and social security number verification (such as a social security card or medicare card).
7. What about an estate to leave to my heirs?
If you decide to sell or no longer use it as your primary residence, you or your estate will repay the cash you received from the reverse mortgage, plus interest and other predisclosed financed fees, from the sale or refinance of the home.. The remaining equity in your home belogs to you or your heirs. None of your other assetsor those of your heirs will be affected by HUD's reverse mortgage loan. It is important to realize that the money you receive from the reverse mortgage is not taxable as income.
8. How much money can I get from my home?
The amount you can borrow depends upon your age, the current interest rate and the appraised value of your home. Generally, the more valuable your home, the older you are, and the lower the interest rate, the more you can borrow. You can borrow a percentage of the appraised value or the FHA lending limit, which is currently $417,800. As a general rule, a 62-year-old homeowner can borrow 55 percent of the lesser of home's value or FHA lending limit, whereas an 80 year old may borrow 65 percent of the home's appraised value.
9. Can I apply at any bank or mortgage lender for this mortgage?
No, only Hud approved lenders with actual, recent experience in originating reverse mortgages may offer this plan, therefore make sure your loan representative is properly equipped with the knowledge to advise you in a thorough and professional manner.
10. How do I receive payments?
There are several options:
- Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
- Term - equal monthly payments for a fixed period of months selected.
- Line of Credit- unscheduled payments, at timesand in amounts of the borrower's choosing until line of credit is exhausted.
- Lump sum payment of cash.
You may combine any of the payment options to suit your needs and, should your needs change at some point in time, you may elect to restructure how you receive your funds. If you currently have a mortgage on your home, we must be able to pay it off at the closing of the reverse mortgage.
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