The reverse mortgage loan process has changed as of April 27, 2015 to become more like conventional loans. No longer will you be able to call multiple lenders and get an accurate quote based off of an estimated home value, mortgage balance, and youngest homeowner birth date. To get an accurate quote, you'll need to be prequalified by an experienced reverse mortgage specialist. Talking to a loan officer that closes a handful of reverse mortgages per year is dangerous due to their part-time attention to a complex, dynamic business. Gathering Information On Reverse Mortgages The way to approach the process to first learn about a reverse mortgage loan, get an idea how it works and the different uses of one, is to contact us for a reverse mortgage information packet. We'll send you an estimate based on the assumption that you will pass the qualification process and will not be subject to any set-aside for taxes and insurance. You can digest the information and figure out if the loan is a good fit for you.
As a rule of thumb, you need about 40%-50% equity. The loan can only be taken on a home that is your primary residence. If you stop living in your house for 12 months, the loan will become due. There's a financial assessment Before you receive your HECM, you must take a financial assessment, which will look at your income and credit history. Based on the results of this assessment, some of the loan's proceeds may be set aside to pay for property taxes and insurance. There are five payout options These are: lump sum, tenure, term, line of credit, modified tenure, and modified term. Lump sum and line of credit are fairly straight forward. Tenure, term, and the modified versions refer to monthly payments. See this page for more information. You must use the proceeds of your reverse mortgage to pay off the balance of your conventional mortgage. This is why you need so much equity in your home to qualify. You must continue paying property taxes and homeowner's insurance. You will not receive all your home equity from this loan.
If you have derogatory credit, we'll need to talk to you about why the issue occurred. If there is an extenuating circumstance that caused you to have financial problems, we'll need to know what it is, so we can see if an exception can be granted. Working With An Experienced Broker When you work with a reverse mortgage broker, you'll have some advantages over going directly to a lender. Brokers are able to take your loan application to any lender they have a relationship with. An experienced broker will weigh the option of going with the lender with the best combination of rate and cost vs. one that can approve a loan with some extenuating circumstances. If your loan is declined by one lender, we can take it down the road to the next, as we know that the rules are somewhat subjective. That's not the case when you apply directly with a lender. The reverse mortgage loan process just became much more complex, but it doesn't have to be felt by our customers. If you work with an experienced, educated reverse mortgage specialist, you won't necessarily know the difference.
The Lowdown on Reverse Mortgage Loans... Our Reverse Mortgage Rates Are Low & Our Process is Quick & Painless A reverse mortgage is a loan for seniors age 62 and older. HECM reverse mortgage loans are insured by the Federal Housing Administration (FHA) and allow homeowners to convert their home equity into cash with no monthly mortgage payments. We're here to make the reverse mortgage process a whole lot easier, with tools and expertise that will help guide you along the way, starting with our FREE Reverse Mortgage Qualifier. We'll help you clearly see differences between reverse mortgage options, allowing you to choose the right one for you. The Reverse Mortgage Process Here's how our reverse mortgage process works: Complete our simple Reverse Mortgage Qualifier Receive options based on your unique criteria and scenario Compare mortgage interest rates and terms Choose the offer that best fits your needs Why a Reverse Mortgage? A reverse mortgage pays off your existing mortgage, should you have one, by allowing you access to the home equity you've worked so hard to build.
As people near retirement, they may believe that they are no longer viable candidates for loans. With their incomes deriving from pensions or Social Security benefits rather than steady paychecks, senior citizens might falsely think that banks, credit unions, and mortgage lenders will turn them away if they apply for loans. However, seniors now have the unique advantage of being apply to apply for financing that currently is unavailable to people younger than the age of 62. Rather than take out a conventional bank loan, senior citizens can instead apply for and receive cash based on the equity in their homes, a loan that is known as a Home Equity Conversion loan (HECM) or a reverse mortgage. Given this lending advantage, it can help seniors to know exactly if and how they can qualify for a reverse mortgage. Does my home qualify? One of the first criteria that lenders will consider involves the type of home in which a person lives. The house must be used as a primary residence and cannot be owned jointly with the person's children or business partners.
We suggest you research the credentials of the person that you are working with. Use our request an estimate tool to get the process started today.
It typically must be owned by the loan applicant himself or herself, or that person and his or her spouse. Along with ownership and primary use, lenders also typically accept homes that are single-family residences, condominiums, town homes, duplexes, or manufactured homes that comply with current FHA standards. The house cannot be a summer home or a second residence for the family. It also cannot be an apartment building or a building that is used for multiple tenants Do I qualify based on my age? People who apply for this loan must also meet the age requirements. Only those individuals who are aged 62 or older are welcome to apply for a reverse mortgage. People who are younger than that age will be denied. Likewise, married couples are welcome to apply as long as one of them are 62 or older. Until the other spouse reaches that age, the loan may be listed in the qualifying spouse's name only, however. What is the Mortgage Requirements? Along with meeting the age and homeownership qualifications, people also must meet certain criteria in regards to the liens on their homes.
When it becomes due, the borrower has 6 months to repay. This fact can affect individuals living in a home that are not named on the loan. HECMs have made the news because spouses who were not named on the loan were forced to move when the borrowing spouse passed away. The 10% delinquency rate is far higher than the rate of delinquency on standard home loans. That said, it is unclear how many borrowers have faced foreclosure. The CFPB's report is now a few years old, and recent changes to the HECM program have helped to reduce the frequency and severity of these problems. About the Editor Aaron Crowe is a freelance journalist who specializes in writing about personal finance. He has written for AOL, U. S. News & World Report, WiseBread, Bankrate, AARP, Allstate Insurance, Wells Fargo, newspapers, and various websites about credit, retirement, mortgages and related topics. You can find his work at or on Twitter @AaronCrowe.
In 1984, American Homestead created a program that allowed borrowers to stay in their homes. In 1987, the HECM began as a pilot program as part of the Housing and Community Development Act. In 1988, President Ronald Reagan signed the act that allows HECM to insure these loans. In 1998, the HECM program, still operating as a pilot, becomes permanent. The FHA gains the authority to insure 150, 000 loans per year. Previously, HECM origination was capped at relatively low numbers. Originations pick up throughout the 2000s, rising from under 10, 000 per year in the 90s to a peak of over 114, 000 in 2009. In 2011, the FHA is given the authority to insure up to 275, 000 HECMs per year, though annual demand has never approached this level. As of 2012, the market is primarily non-depository institutions originating HECM loans. It remains this way. By the Numbers In 2009, half of homeowners eligible for the HECM program had 50% or more of their net worth in their home's equity. The baby boomer generation contains 32 million homeowners who may need this product.