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TheReverseMortgageLady.com
Your Reverse Mortgage Information Source.


My name is Hari K. Bird,
The Reverse Mortage Lady.
Moving forward in Reverse.

Now, the Reverse Mortgage is even better.

WHAT IS A REVERSE MORTGAGE?
“A Reverse Mortgage is a home-equity loan
for seniors that requires no monthly payments.”

The basics explained: A mortgage is a mortgage is a mortgage. Everyone knows what a mortgage is; a person buys a house, finances it for 30 years, make payments, pay the property taxes and home-owners insurance. Sell the house at any time and pay back the lender. As an owner (with a lien, of course), one can modify the house, paint the walls odd colors, install funky carpet and maybe even install a swimming pool. A Reverse Mortgage is no different that the previously described, except one doesn’t make mortgage payments -- and all borrowers must be age 62 or over. It’s that simple!

To qualify: Since the lender (per the Federal Housing Administration - FHA) doesn’t require any monthly payments, income, assets, and credit score doesn’t apply with the FHA Reverse Mortgage program. A senior just needs sufficient equity to qualify. Typically equity needs to be around 50% - depending on age and interest rates. Older borrowers need less equity.

Interest rates: Currently the adjustable rate reverse mortgage is charging under 3%. A wholesale rate – if you will. Since the lender is rarely at risk of a defaulted loan (i.e. no mortgage payments and FHA insures the loan from various defaults) the lender can charge lower interest rates than traditional mortgages. These interest rates are usually based on the LIBOR (an international index).

Payments: As mentioned before the senior doesn’t ever have to make mortgage payments to the lender for life (even if life is 50+ years more, or just 6 months – whatever “life” is) as long as the senior maintains the house to federal Department of Housing and Urban Development (HUD) standards, pays property taxes and home-owners insurance and lives in the property as their primary residence.

Funds to Client: Since this is a mortgage in reverse, the lender pays the Borrower(s). One can choose to receive all of the funds; fixed monthly payments, leave it all in a line of credit, or a combination of these. The funds that remain in the line of credit will increase. Since the funds are a loan, it is not considered income and thus doesn’t affect Medicare, Medicaid, or Social Security. Any existing liens or mortgage on the property must be paid at the time of closing of the reverse mortgage.

Safety and Security:The Home Equity Conversation Mortgage (HECM,) also known as a reverse mortgage, is currently the only reverse mortgage available in the United States that is fully FHA insured (government-backed). What this means is the FHA will protect the senior in several ways including: 1) If the home’s value at the time of settlement is less than the amount owed the FHA will make-up the difference (some restrictions apply of course); 2) If the lender were to fail under the obligations of the contract, the FHA will step-in as if they were the original lender.

Reverse debt: Unlike traditional mortgages where the balance owed is always decreasing with every mortgage payment, the reverse mortgage has an increasing balance. In a normal economy the home usually increases in value and thus the home’s equity grows larger. With a reverse mortgage the loan balance increases but so does the home’s value increase, thus creating additional home-equity despite the ever-increasing loan balance. The way the reverse mortgage has been designed by the FHA, the heirs will still inherit a lot of home equity – in nearly all cases. Remember, the FHA will only allow about half of the appraised value to be borrowed – meaning the value of the home should always exceed the loan balance.

Disadvantages to borrowers: There's little to none for seniors age 62+ ... unless you intend to sell your home during your lifetime. (You can work out a scenario if this might be a reality.)

Disadvantages to heirs: The senior is “spending the kid’s inheritance”. But isn’t the home’s equity like an IRA that one pays into each year? Now it is time for the home to pay the senior - to enhance the golden years.

Costs: Most lenders charge an up-front fee of around $350 -- a “deposit”, if you will. There is no application fee, no appraisal fee, per se. This deposit goes toward paying for some of the up front costs to the lender such as a flood certificate and some toward the cost of the appraisal. Most other fees are added to the loan balance such as; title search and examination, title insurance, appraisal, local taxes, etc. – normal costs for any traditional mortgage. Also HUD charges a 2% MIP (Monthly Insurance Premium) fee. No where else can one get a no-credit-score, no-payment home loan and still have such low interest rates.

Reverse Mortgage for home purchase: Effective early 2009 realtors use a reverse mortgage to help seniors purchase a home with a down payment of just 50% and the client never has to make a mortgage payment -- for life.

The Benefits:
1) Consider increasing your standard of living by purchasing a nicer home using a reverse mortgage;
2) The Realtor can assist by selling the current (older) home and help you move into a more modern home, condo or even a maintenance-free townhouse.

Realtors are eager to help as they get two-for-one: 1) The listing; and 2) The sale of the newer home. Also remember that there is no income or credit requirement for the client (age 62+) to qualify – just the down payment of approximately 50% of the purchase price. Click here for a history of the Reverse Mortgage.

 

The Traditional Mortgage

The Reverse Mortgage

With either a Traditional Mortgage or Refinance Loan the Homeowner borrows large amounts of money and makes monthly payments. As payments are made, the loan balance gets smaller and the home's equity grows.

On the other hand, with the AARP endorsed Reverse Mortgage, the Homeowner usually borrows small amounts, i.e., monthly or at other intervals, through a line of credit. Over the course of time, the loan balance gets larger, and the home's equity gets smaller.

A Reverse Mortgage enables senior homeowners (62+) to convert part of the equity in their homes into tax-free income without having to sell the home, give up title, or take on a new monthly mortgage payment. The Reverse Mortgage is aptly named because the payment stream is “reversed.” Instead of making monthly payments to a lender, as with a regular mortgage, a lender makes payments to the senior.

Payment of the loan is required only once, at the end of the loan, which in most cases is when the Homeowner sells the home, or no longer uses the home as a primary residence for 365 consecutive days, or when the Homeowner passes.

GET YOUR EQUITY OUT

AND USE IT HOWEVER YOU WISH

When you apply for a Reverse Mortgage, there are no income, employment, health, or credit qualifying restrictions.

Maximum loan amount is based on the Borrower's age, where you live, and the value of the home. The current interest rate is around 5% - 6%. The amount owed can never exceed property value, so a Reverse Mortgage can never cause you to lose your home.

The funds received during the loan term, plus any accrued interest, become due when you sell the property or no longer use the home as a primary residence.

Best of all, you'll have no more monthly mortgage payments

FLEXIBLE ACCESS TO EXTRA INCOME

  

YOU CAN OBTAIN YOUR LOAN PROCEEDS...

In monthly installments to supplement income;

As a line of credit to draw on as necessary;

As a cash advance in addition to monthly allotments. And Borrowers can change funds distribution plans as many times as they wish.

THE PROCESS



                              

GETTING YOUR REVERSE MORTGAGE REQUIRES...

AWARENESS -- Consumer, i.e., senior Homeowner or adult child, learns about Reverse Mortgages or a particular product from an article, ad, direct mail, word-of-mouth, Broker, etc.

ACTION -- Consumer seeks more information by contacting a Broker, Lender, HUD, Fannie Mae, National Center for Home Equity Conversion, AARP, or Financial Planner.

COUNSELING -- The Consumer is required to participate in a Consumer Education session with a HUD approved counselor. This can be done by phone or in person. The purpose of this session is to explain the legal and financial considerations of obtaining a Reverse Mortgage. This session ensures that you understand the program and your obligations as stated in the loan agreement. Upon completion, you will be provided with a Certificate of Counseling which is then given to your Lender as evidence of completion. The certificate expires 180 days after the session. Get more Counseling details here.*

WHAT IS THE PURPOSE OF COUNSELING?
“The purpose of counseling is to explain in detail the important
legal and financial considerations of obtaining a Reverse Mortgage.”

APPLICATION and DISCLOSURE -- Consumer completes the application for Reverse Mortgage with Lender and selects payment option: fixed monthly payments for life, fixed monthly payments for term, lump sum payment, line of credit, or combination of all the options. Consumer provides Lender with required documents, i.e., photo identification, verification of Social Security number, copy of deed to home, home owner's insurance declaration page, information on any existing mortgage(s) on property, and their Counseling Certificate.

PROCESSING -- Appraiser prepares appraisal report. If structural problems are noticed or suspected, physical inspection of home is ordered.

UNDERWRITING -- After receiving all pertinent information and data, the Lender finalizes the loan parameters with Consumer, i.e., payment options, packages the loan, and then submits the package to the underwriting department for underwriting and final approval.

CLOSING -- Following approval, closing (signing) of the loan is scheduled. Initial and expected interest rates are set. These affect the amount of funds available to Consumer, along with the age of Borrower(s) and value of the home. Closing papers and final figures are prepared. Closing costs are normally financed as part of the loan. Previous payments, if any, by Consumer for appraisal may be refunded or used to reduce the closing costs financed. Lender or title company has the Consumer sign loan papers. Any existing debt on the home is paid off. A new lien is placed on the home.

RIGHT OF RESCISSION -- Consumer has three business days after signing papers in which to cancel the loan, the "three-day Right of Rescission". Upon expiration of this period, the loan is disbursed, the Consumer gets access to the funds in the form of the payment option they selected, i.e., monthly checks, etc.

REPAYMENT -- Consumer is not required to make any monthly mortgage payments to lender during the life of the loan. The Reverse Mortgage becomes fully repayable upon: a) the passing of the Borrower or last Co-borrower; b) the sale of the home; c) a permanent move-out from the home by the Borrower, i.e., to a nursing home, or another event, after which the home is no longer the Borrower’s principal residence for 365 days in a row. The loan may be repaid by the Borrower or Borrower’s heirs-estate, with or without the sale of the home.

A REVERSE MORTGAGE MEANS...

              

No More Monthly Mortgage Payments
and Living Better Someday, Today!

YOU'RE JUST SIX STEPS AWAY
FROM GETTING A REVERSE MORTGAGE

EDUCATION
This is the where you are, right now. You are taking the time to learn about the Reverse Mortgage program to determine if it is appropriate for your situation.

CONSUMER COUNSELING
*The HUD required Consumer Counseling session can occur by phone or in person with a HUD approved counseling agency. The purpose of counseling is to explain in detail the important legal and financial considerations of obtaining a Reverse Mortgage. Counseling ensures that you understand the program and your obligations as stated in the loan agreement. Upon its completion you are provided with a signed Certificate of Counseling, which is given to your Lender as evidence of completion. This certificate expires 180 days after the session. Contact us here.

APPLICATION
You sit down with the Lender and sign the loan application. The Lender will disclose the estimated total cost of the loan, as required by the Federal Truth In Lending Act. Request an application here.

PROCESSING
The Lender will order an appraisal of your home, do a title search and get a payoff value for any outstanding mortgages. Typically, it takes between 25 and 45 days to process a loan.

CLOSING
Loan documents are signed, including the Mortgage or Deed of Trust.

CASH DISBURSEMENT
You have three business days after closing in which to cancel the loan, the three day Right of Rescission period. Upon expiration of this period, the initial draw you selected is usually available by the 5th day. Monthly payments are usually received at the beginning of the new month after a 3 week set up period.

YOU CAN KEEP YOUR MONTHLY PAYMENTS

 
  

A REVERSE MORTGAGE ENDS MONTHLY PAYMENTS

GET ANSWERS HERE

Q. I am told the first thing I have to do in order to proceed with a Reverse Mortgage application is to complete HUD approved independent counseling. How do I get the required counseling in order to qualify move forward with my Reverse Mortgage?
A. You've come to the right place. Just have your mortgage representative contact us here so we can arrange your counseling session. You can then proceed with you application. See 'COUNSELING' above.

Q. Am I qualified for a Reverse Mortgage if I currently have an existing loan on my home?
A. Yes, but the existing loan must be paid off prior to, or at the settlement of the Reverse Mortgage. Quite often the Reverse Mortgage is used to refinance an existing loan.

Q. My property is held in a Living Trust. Do I qualify?
A. Yes, but you must be the primary Trustee and qualified by age.

Q. To avoid probate, my children and I own the property in joint tenancy. Do we qualify?
A. Yes, if the children are age 62 and older and live on the property. Otherwise, they would need to be taken off the title for you to participate.

Q. Are the cash advances considered income by the IRS?
A. No. The cash advances are actually loan proceeds distributions and are not considered income. The cash advances are tax free.

Q. Are manufactured homes eligible?
A. Yes. The home must have been built in July, 1976 or after and have a permanent foundation that is approved by FHA. A structural inspection is required prior to processing of the Reverse Mortgage. If the home is on leased land certain additional restrictions can apply -- please ask for a clear explanation.

Q. Are there restrictions on how I can use the money?

A. No, after all, it's your money!

Q. What about fees and cost?
A. There are four basic types of charges, other than interest, involved in setting up a Reverse Mortgage...

Sometimes lenders will charge an origination fee depending on the reverse program being offered.

Initial and monthly Mortgage Insurance Premium, called MIP.

Other closing costs, such as appraisal, title research, title insurance, flood certification, etc.

Q. Are these fees payable at closing or added monthly to the loan balance?
A. Typically, the only out of pocket expense for participation in the Reverse Mortgage program is the cost of the appraisal.

Q. What about the interest rate?
A. Currently nearly HECM loans are adjustable to the LIBOR, London Inter Bank Offered Rate. The change in the interest rate has no effect on the amount or the number of loan advances that the Borrower can receive, but it does cause the loan balance to grow at a faster or slower rate. The home must have only a reasonable remaining mortgage balance such as 50% or be owned free and clear. The Reverse Mortgage may be used to pay off the balance on any existing loans or liens.

Q. What about property taxes? Will I lose my home if I can't pay the taxes?
A. You want to make sure that you leave adequate funds in your account to cover annual property taxes. These funds grow at an annual percentage rate and this feature can help offset increases in property taxes.

Q. When is loan repayment due?
A. The loan is due and payable when the Borrowers no longer occupy the property as their principal residence for 365 days in a row, or if they fail to comply with the loan agreement, i.e., pay property tax or maintain Homeowner's Insurance. The loan agreement also states that the Borrowers understand that it is their responsibility to maintain the property in normal living condition.

The loan must be repaid in one payment, either from the sale of the home or through other resources. There is no requirement that the property be sold, only that the loan is repaid, i.e., the beneficiaries can get a conventional or "Forward" Mortgage.

Q. What is the affect of the loan proceeds on my public benefits?
A. Loan proceeds are not considered income and will not affect Social Security or Medicare because these programs are not based on need. You'll need to check with a benefit specialist for the Medicaid or SSI programs as certain rules must be adhered to so as not to be disqualified for these types of public benefit programs.

Q. What is the eligibility requirement?
a) All Homeowners must be age 62 or older and they must occupy the property as their principal residence.

b) The home must have or only a reasonable remaining mortgage balance exists such as 50% or be owned free and clear. The Reverse Mortgage may be used to pay off the balance on any existing loans or liens.

c) The property must be a single-family, condo, townhouse, or up to a four-unit dwelling.

Q. Can I buy a home with a Reverse Mortgage?
A. Yes, as long as the loan is for no more than 50 percent of the purchase price, and the property is your principal residence.

Q. How much can be borrowed?
A. Maximum amount that can be borrowed is based on these three factors:

The age of the youngest Homeowner.

The market value of the home.

The current interest rate.

Q. What are the Reverse Mortgage loan proceeds options?
A. There are several different ways of receiving the loan proceeds. Homeowners can choose an option that best fits their needs and goals...

Term Option: Provides fixed cash advances for a set period of time.

Tenure Option: Provides fixed cash advances for as long as the Homeowners occupy the property as their principal residence.

Line of Credit Option: Establishes a credit line which the Borrower draws upon as he or she wishes.

Combination Option: A combination of the above options. --

 

  

Contact Me Here

Mortgage Glossary

Real Estate Glossary

To Serve Is To Succeed

Questions And Answers

Which Loan Is Right For You

AARP On Reverse Mortgages

Understanding Your Credit Score

Click Here For Our Online Seminar

How To Select A Mortgage Consultant

Celebrity Candidates For Reverse Mortgage

Prospective 2009 Reverse Mortgage Candidates

TheReverseMortgageLady.com
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