HECM Questions you need answered before even starting.
How does the H.E.C.M. Reverse Mortgage work? Most of these common HECM questions are somewhere in my website, but dont hesitate to call or ask. The answer is the exact same as any other mortgage except how it is paid back the greatest feature is that there is no repayment of the loan as long as the homeowner occupies the home as their primary residence*. Borrower is also required to keep the property condition, taxes and insurance payments. The interest or any payments on the house aren’t paid back until the house is sold or the last borrower moves out*.
The non-recourse feature of the Reverse Mortgage insures that the borrower will never be responsible for more than the value of the home.”
How does the Reverse Mortgage process work, what are rates, do I qualify, explain the counseling? I am local here with an office in Eagle Point Corporate Drive on Hwy 280 Hoover/Birmingham, and have a Huntsville office also, so I make house calls in between. Call me anytime with all of your common HECM questions at (205) 908-2993 in Birmingham.
Most of the time I find if possible people would rather conduct business in person if it doesn’t cost them anymore! I will help you start to finish with the simple steps to the Reverse Mortgage!
Education -Do your research. Read up on the process as much as you can. Talk to your local Better Business Bureau (BBB) and your local American Association of Retired Persons (AARP) about the process and the lender. The AARP Foundation Reverse Mortgage Education Project includes a national network of reverse mortgage counselors dedicated to helping seniors understand and evaluate the risks and benefits of reverse mortgage borrowing.
Counseling – Federal regulations and state law often requires that reverse mortgage borrowers receive state-certified housing counseling. And while this counseling is mandatory for HECM reverse mortgage borrowers. Counseling appointments typically take about an hour and may be handled in-person or over the telephone. There is a list on another page “steps to a Reverse Mortgage “List of Counseling Agencies–HUD requires each borrower applying for a reverse mortgage loan to receive counseling prior to completing a reverse mortgage transaction.
HUD requires each borrower applying for a reverse mortgage loan to receive counseling prior to completing a reverse mortgage transaction. We will provide you more approved agencies upon request.
Loan Application – Your local lending agent will require you to complete a loan application and determine how to receive payment.
These are you options: 1) Monthly payments for a fixed term 2) Line of credit 3) Lump sum 4) Any combination of the above 3
Processing -Your lender will order: A credit report, A title report, An appraisal
We payoff all lien attached to the house.
Underwriting – Once your lender has received and completed the required documentation, your loan package will be submitted to the financial organization that will be underwriting the loan, for final approval.
Closing – After your reverse mortgage loan has been approved and signed, the loan’s initial interest rate will be determined. Closing costs are typically financed by the loan.
Disbursement – Once you have officially closed on the loan, you have 3 business days to change your mind and cancel the loan. After the 3-day period, the funds are disbursed, including any amount that will be applied to a previous lien on the property. Then you will begin receive payments according to the payment option you selected.
Repayment – You will not be required to make monthly payments during the term of your loan. The reverse mortgage becomes due and payable in full once: 1) the home is no longer being used as a primary residence, 2) it is sold, or 3) the borrower passes away. Upon the death of the borrower, the loan may be repaid from the sale of the home or by refinancing the existing reverse mortgage. All remaining equity belongs to the heirs/estate.
What can I expect to learn from my housing counseling appointment?
Accredited housing counselors work with seniors to help them evaluate the viability of a reverse mortgage loan by looking at the borrowers:
1) Current budget 2) Monthly income 3) Loan risks 4) Loan benefits 4) Interest rates 4) Associated fees
There might not be a local counselor in your area of Alabama, – but this can be done one the phone.
HUD-approved HECM housing counselors are required to use loan comparison and analysis software that meets the requirements established by the AARP. Certified counselors must also adhere to the AARP Foundation Reverse Mortgage Education Project counseling policies and procedures. Because it is their job to help insure that you are making a responsible financial decision, they may also review financial options with you. You must be able to prove that you can still maintain your home, pay your taxes and insurance.
The AARP Foundation Reverse Mortgage Education Project regulates a national network of HUD-approved HECM housing counseling agencies by administering the exam that certifies counselors for HUD-approved HECM housing counseling agencies. Talk to your counselor. Start by scheduling an appointment with a HUD-approved reverse mortgage counselor. It is their job to help you understand reverse mortgages and help you evaluate your situation. So don’t pay for information that should be free. I can give you a list of Local Alabama and National counselors, just ask.
What can I expect to be included in closing costs?
Typically, closing costs are financed into the reverse mortgage loan. Some of the closing costs commonly charged to a reverse mortgage borrower can include:
Credit report: Checks for any judgments or tax liens against the borrower FHA mortgage insurance, FHA appraisal
Flood Certification: Determines whether or not the residence is built on a federally designated flood plane
Title insurance: Protect owner and lender against any loss due to disputes over property ownership. Ownership of a property – the larger the loan amount, the higher the cost of the title insurance.
Escrow, Settlement or Closing: Typically includes a title search and any other required closing services
Document Preparation: Preparation of all final closing documents
Recording: Fees associated with recording the mortgage lien with your County Recorder’s Office.
Courier: Overnight mailing of any documents between the lender and the title company or loan investor — generally under
Look closely at the terms and conditions. Watch out for unethical terms and extraneous fees. Your HUD-approved counselor can help you look for these. Don’t be afraid to ask. And if you are concerned that a lender may be violating the law, report them to your reverse mortgage counselor.
On traditional refinance Reverse Mortgages, you have 3 business days to change your mind.
REVERSE MORTGAGE — FACT OR FICTION
I would need to be debt-free to qualify.
FALSE — There are now credit requirements called “Financial Assessment”
My health would disqualify me.
FALSE — There are no health requirements.
I still own on my home, so I wouldn’t qualify.
NOT NECESSARILY — You may still qualify. The proceeds of the reverse mortgage loan may be used to pay off the debts.
If I take out a reverse mortgage, the lender agent will own my home.
FALSE — The lender’s interest is limited to the loan balance and they will NEVER take control of the title. You and your heirs/estate retain ownership of the home.*
I can’t get a reverse mortgage loan without it affecting my pension, Social Security or Medicaid.
NOT NECESSARILY — A reverse mortgage will not affect most means-tested benefits.
HOWEVER, be sure to check with your local area agency on aging since programs do vary by state.
I would end up owing more in taxes.
FALSE – All proceeds associated with a reverse mortgage are tax-free because they are considered borrowed funds.
If the amount of my reverse mortgage loan ever exceeded my home’s appraised value, I’d end up owing money.
FALSE: A reverse mortgages is considered “non-recourse” loan. You will never be responsible for more than the home’s value
My loan terms can change if my loan is sold.
FALSE – At the closing of your loan, you will sign a legal contract assuring your loan’s terms cannot be changed, regardless if the loan is sold.
Reverse mortgages are only a good idea for seniors who are cash poor.
NOT NECESSARILY — While some seniors may clearly have greater financial need, a reverse mortgage can be an excellent estate-planning tool for any senior that has substantial equity in their home.
A reverse mortgage would end up being a burden to my kids.
FALSE – Borrowers have between six months to a year to pay off the reverse mortgage if they choose. The loan may be repaid by refinancing the existing reverse mortgage, or by selling the property. Any remaining proceeds would then belong to the heirs, or the estate.
If you have any Reverse Mortgage HECM questions about , that you think are small or who would ask that? You are not alone , please call or email and I will be happy to answer.