What To Expect When Applying For A Reverse Mortgage

Posted on by Janis Layman

Reverse Mortgage Seattle Lynnwood Edmonds Shoreline WashingtonIf you’ve reached the point you are ready to apply for a reverse mortgage, you have likely done a fair amount of research (and if you haven’t, feel free to read through the informational articles here on my blog).  So what comes next? Here’s a quick run down of what to expect…

Age qualifications.  You’re probably aware the borrower needs to be age 62 or older to qualify, but in the case of married couples who both want to be on the loan, both borrowers will need to be 62 or older.  In addition, the loan amount will be calculated of the age of the youngest borrower, with the older the borrower, the more funds available.

Does your home qualify?  Not every residence qualifies for a reverse mortgage but many do.  The home must be HUD and FHA approved.  These include: single family or a 2-4 unit homes with one unit occupied by the borrower, as well as some condominiums and manufactured homes.  If you’re looking to purchase a home with a Reverse Mortgage for Purchase, any new construction must have a certificate of occupancy.  Once it’s determined your home qualifies, an appraisal will be done to determine it’s value.

Financial Assessment.  In some recent changes made by HUD to ensure the continued progress of the reverse mortgage industry, a financial assessment became part of the application process.  This is set up to make sure borrowers are financially stable enough to continue to pay property taxes, homeowner’s insurance, and other related costs to the home, although once a reverse mortgage is obtained on the home, there are NO mortgage or loan payments.  Although the financial assessment is similar to that with a traditional mortgage, if borrowers don’t meet the traditional criteria, there are still options through a Fully-Funded Life Expectancy Set-Aside, which is an amount drawn under the HECM that is reserved for payment of property taxes and insurance by the lender; or a Partialy-Funded Life Expectancy Set-Aside which works the same as the Fully-Funded option except a smaller reserve is drawn when borrowers meet credit requirements but not income requirements. The amount of both of these reserves is determined by the age of the borrower and the value of the home. 

During these first steps, it’s incredibly important to work with a trusted and reputable reverse mortgage advisor and lender.  You should never feel pressured or feel your concerns and/or questions aren’t being addressed.  Also watch out for scams that some homeowners can easily fall prey to. 

Janis Layman is a Reverse Mortgage Specialist serving the Seattle, Lynnwood, Edmonds, and Shoreline areas of Washington.  Contact Janis and learn if reverse mortgage is right for you.

Should a Reverse Mortgage be Part of Your Retirement Portfolio?

Posted on by Janis Layman

Reverse Mortgage Seattle Lynnwood Edmonds Shoreline WashingtonFor the past quarter century seniors have easily managed to retire on three things: company pension plans, social security, and personal savings.  But with an always uncertain economy facing us today and in the future, many baby boomers are taking a second look at their retirement portfolios.  Previously, tapping into home equity for retirement has been considered a last resort.  But should it be?

Both company pensions and social security benefits face much uncertainty down the road, and if you’re lucky enough to have a somewhat stable retirement investments, protecting them will be high priority.  When adding home equity into the retirement equation, statistics show most baby boomers 51 and over have enough to retire comfortably.  So where does this leave reverse mortgages?

For seniors 62 and over reverse mortgage is a feasible option.  Homeowners can access the equity in their home, live mortgage and loan payment free, and no repayment is due until the last borrower passes or permanently leaves the home at which time there are options.  For some retirees, it could mean the difference between living and living well.

When looking down the road toward financial planning for retirement, ask yourself a few questions and determine if a reverse mortgage might fit into your Plan A or your Plan B.  Discuss it with your spouse and with your financial planner.  Learn the facts about reverse mortgage and how it will affect your loved ones after you pass.

Janis Layman is a Reverse Mortgage Specialist serving the Seattle, Lynnwood, Edmonds, and Shoreline areas of Washington.  Contact Janis and learn if reverse mortgage is right for you.

 

What is FHA Insurance on a Reverse Mortgage Loan in Seattle, WA?

Posted on by Janis Layman

Reverse Mortgage Seattle Lynnwood Edmonds Shoreline WashingtonIf you’ve taken the time to learn even a little bit about a reverse mortgage in Seattle, it’s likely you’ve heard the term “FHA insured” at least a couple of times.  But what exactly does it mean?

Homeowners 62 and over, with significant equity in their home, may be eligible for a reverse mortgage.  These loans are typically insured by the FHA and provide non-taxable income to the borrowers based on the available equity in the home.  The more equity and the older the borrower, the more funds available.  The funds can be accessed via a line of credit, monthly installments, a lump sum, and even can be wrapped into the purchase of a new home.  The borrower can always use the funds for whatever they deem fit.

The homeowner will live mortgage payment free for as long as they remain in the home, although they will have a few financial obligations related to the house such as homeowners insurance, property taxes, utilities, and HOA fees.  As long as the borrowers keeps current on these few obligations, they cannot be evicted from the home, the home cannot be foreclosed, and they cannot be made to repay the loan.  The loan comes due once the borrower (or the last borrower in the case of married couples) has left the home for 12 consecutive months or passes away.  At this time the loan will be due and payable with time allotted to allow for transitions.  This is where the FHA insurance comes in.

In the case of a death, the home with pass onto the heirs.  At this time they have options, with two being the most common – 1) Pay off the loan and keep the home (often through life insurance or sale of another asset), or 2) Sell the home.

In the scenario of loan repayment the heirs will never have to repay any more than the home is appraised for.  They will only be required to pay 95% of the appraised home value or the full amount of the loan, whichever is less.  Any amount due on the loan above the appraised amount will be covered by the FHA insurance and no one will be held liable.

In the case of a home sale, the heirs will never be required to pay more on the loan than the home sells for as long as the sale price is at least 95% of the appraised value.  Any remaining balance will be covered by the FHA insurance.  On the other hand, if the home sells for more than the loan balance, the heirs will keep any remaining funds.   This is especially important as over the years the housing market shifts.

Janis Layman is a Reverse Mortgage Specialist serving the Seattle, Lynnwood, Edmonds, and Shoreline areas of Washington.  Contact Janis and learn if reverse mortgage is right for you.

 

Reverse Mortgage FAQ – Part 3

Posted on by Janis Layman

Reverse Mortgage Seattle Lynnwood Edmonds Shoreline Washington

 

This is the third in a three part series of frequently asked questions about Reverse Mortgage.  You can find Part 1 here and Part 2 here.  If you have questions that are not currently listed, please don’t hesitate to contact me directly.

Will I Lose My Government Assistance If I Get a Reverse Mortgage?

Because a reverse mortgage is not considered income, it does not affect regular Social Security or Medicare benefits. However, if you are on Medicaid or other public assistance, any reverse mortgage proceeds that you receive may affect your eligibility. Reverse mortgage funds that you retain would be considered an asset, just as other bank funds.  Working with a reputable reverse mortgage lender will ensure you are properly reporting income and not caught by surprise.

What is a Reverse Mortgage Appraisal?

A home appraisal by an FHA approved appraiser is required for every reverse mortgage loan.  Once your reverse mortgage lender has received your application, you will be contacted by an appraiser to schedule a time to conduct the appraisal.  The appraisal will consist of an inspection, where the appraiser will walk through your home and possibly take photographs.  Once the walk-through is completed, research will be done to determine your home’s worth based on various factors, including comparable home sales in your area.  After the research has been done, an appraisal report will be generated which will include all of the factors that went into determining your home’s appraised value.

How Do I Spot a Reverse Mortgage Scam?

Unfortunately con-artists often prey on the elderly through reverse mortgage scams, but there are several ways to spot such activity.  Be skeptical of lenders who solicit through means such as television, door-to-door, churches and community centers, direct mailers, or other extensive advertisements.  Asking for large amounts of money up front is a very clear indicator.  Anything required beyond a routine appraisal deposit of approx $300 is cause for concern.  Steer clear of reverse mortgages that are marketed as “Foreclosure Assistance”.  A high pressure salesperson is a red-flag, as it is important to clearly understand what you are signing and to have any questions thoroughly answered.  Working with a reputable lender is critical when making such a major decision as obtaining a reverse mortgage.  Learn more about reverse mortgage scams here.

What Happens if the Borrower Moves Into a Senior Care Facility or Something Similar?

A reverse mortgage becomes due and payable when the last borrower moves out of his or her home permanently. For instance, moving into a senior care facility, selling the home, passing away or moving in with the children.  In the case of a married couple, if both spouses are on the loan as long as one spouse remains in the home the loan will continue without hiccup.

What Happens to a Reverse Mortgage After the Owners Pass?

When the homeowner passes – or the last spouse in the case of a married couple – the home will transfer into the estate or a specific person according  to the wishes expressed in the homeowner’s will.  At this time there are three main options: pay off the remainder of the loan, obtain a conventional loan, or sell the home.  For more extensive details about each of these options, read this article on my blog.

Janis Layman is a Reverse Mortgage Specialist serving the Seattle, Lynnwood, Edmonds, and Shoreline areas of Washington.  Contact Janis and learn if reverse mortgage is right for you.

Tips to Finding a Reverse Mortgage Lender

Posted on by Janis Layman

 

Reverse Mortgage Seattle Lynnwood Edmonds Shoreline WashingtonFinding a reverse mortgage specialist is one of the most important parts of the entire process.  Not only do you want to work with someone knowledgeable and trustworthy, you want to make sure YOU feel comfortable with them.  Here are some tips to finding just the right person.

Where to look?

Reverse mortgages are marketed in every possible way.  Television, radio, mailers, internet, etc.  Although not all of these methods ensure trouble, some of them can be scams.  When seeking a reverse mortgage lender, it’s important to speak with people you trust.  Ask around at your bank or financial institution.  Speak with a financial or retirement adviser.  Talk with neighbors or friends who have utilized a reverse mortgage.  Seek information from the local Chamber of Commerce or Better Business Bureau.   Utilize other resources that may be available in your community.

What to look for?

Working with a reputable reverse mortgage specialist is critical.  The reverse mortgage industry is riddled with scams and flashy sales.  It can be risky to get involved with a lender who does not offer all the details or who is just looking to make a “quick sell”.   A reputable lender and valuable specialist will have strong connections in the community, working closely with a network of professional organizations.

Accreditations and ratings?

Seek out a specialist or lender that is a member of the National Reverse Mortgage Lenders Association (NRMLA).  Members of the NRMLA must conform to a strict code of lending ethic.  Look for a lender that is affiliated with the  Better Business Bureau (BBB), where you can also learn of any complaints against the company.

Follow your gut.

When it comes down to it, always follow your gut.  Just because a specialist may meet all this criteria doesn’t mean they will be right for you.  If you do not feel comfortable or feel your questions are not being adequately answered, there is nothing wrong with seeking out someone different.

Janis Layman is a Reverse Mortgage Specialist serving the Seattle, Lynnwood, Edmonds, and Shoreline areas of Washington.  Contact Janis and learn if reverse mortgage is right for you.