Reverse Mortgage FAQ

Frequently Asked Questions

Does government gets my home when I die?

The reverse mortgage is exactly that – a mortgage. A mortgage is a recorded security instrument that describes and secures real property as collateral for a cash advance or loan. A mortgage is recorded at the county courthouse record room and secures the Lenders rights for the collateral used in securing the loan. The DEED is something different the deed establishes an ownership chain of title to the property. Deeds exchange hands in a purchase and sale transaction from Seller to Buyer. Since a reverse mortgage is NOT a sale, there is no deed transfer to the Lender or the government. The borrower retains the title and deed to his/her home.

If I do the Reverse mortgage, I am locked in an cannot sell my house.

You can sell the property at any time without a penalty. Just keep in mind if you haven’t made payments in some time you may owe more than the house would sell for! This is especially true if you live in a declining market where home values go down.

Closing Costs are high. Why FHA Insurance?

Often the biggest part of the closing costs composed of the mandatory FHA Insurance or MIP. The Federal Housing Authority (FHA) acts as the insurer to protect the secondary markets and the borrowers from default an for insufficient equity should markets fall or the borrowers die and owe more on the home than its current value. In exchange for this insurance which is called Mortgage Insurance Premium or MIP, FHA guarantees performance of the loan to potential investors. It is also a protection for the borrower since it is a non-recourse loan.

My children will be help responsible for the repayment.

The reverse mortgage is a non-recourse loan. This means that the lender can only derive repayment of the loan from the proceeds of the sale of the property. Even if the value of the home is reduced due to economic, market or property perils, you or your estate can never owe more than the value of the home. Although you heirs will not be responsible for repayment, they are able to work with the loan servicer to repay the loan and as an option buy the home fro themselves.

The reverse mortgage requires that I make monthly payments.

FALSE! – There are no monthly payments required to your lender, however, the borrower is responsible for payment of all property taxes, insurance, and general upkeep of the home.

Does the reverse mortgage require that I make monthly payments?

At least one of the borrowers must have attained the age of 62 to close on the reverse mortgage. However, any borrower may APPLY ad take the counseling by phone up to 60 days PRIOR to turning the age of 62. HUD requires any interested borrower, POA, or spouse, to participate in an approved phone counseling session prior to completing the application with the Lender.

Are all single gamily dwellings eligible for the HECM reverse.

Single family homes are the most common collateral for Lenders and borrowers. Specialty farms, condos, and large tracts of land may present a challenge. The main underwriting guideline is that there must be a residential HOME on the property and it must be the primary residence of the Borrower(s).

I have bad credit, can I qualify?

The Reverse Mortgage underwriting is NOT credit score driven. Lender underwriters manually underwrite all applications. They do not use an automated system in a computer like Fannie Mae requires when doing a conventional forward mortgage!

We look for patterns of payment in the mortgage history (if a current mortgage exists) and payment patterns for paying property taxes and home owners insurance.

Are all Lenders the same?

FALSE! – all Lenders are not created equal even though they all use the same HUD/FHA algorithm to determine benefits. How can this be?

First of all, there are Brokers, and there are Lenders. A Broker makes his money by referring your loan application to a Lender who actually makes the underwriting decision and puts up the money at closing. Brokers have very little skin in the game and have a reputation for dishonesty and ignorance. While there are many great Brokers out there, there are also some smarmy ones. Lenders spend most of their time weeding out the good ones from the bad ones. If you find yourself jumping through a lot of “hoops” to get your loan closed, you are probably dealing with an ignorant Broker. A good one knows what documentation to ask for an closes a transaction within 30 days. There are also ignorant Lenders who hire less than competent underwriting staff. They often request ridiculous documentation to protect themselves from making a mistake.

Do I qualify if my home is already paid ?

False! – A home with no mortgage owed is the BEST time to set up the line of credit and make the HECM your personal financial plan. If there are no liens on the property, your upfront MIP is much less. A borrower can choose the monthly tenure ( a monthly check), a lump sum payment, a line of credit, or a combination of the three. So, plan can be tailored to each individual’s wants and needs. It is truly a financial planning tool for today’s seniors.

Can I get more than one HECM loan?

Borrowers are limited to one HECM at a time but this doesn’t mean you cannot sell the home with the HECM reverse mortgage on it an buy another an use the HECM for Purchase! I spoke to a senior in Florida last year who was on his third HECM transaction! He got a reverse mortgage on a home in Alabama and had it for 5 years.

What Our Client Say