As with any financial decision, getting a reverse mortgage may bring up a number of questions. You may be surprised to know that many of the people we talk to every day have the same questions. We’ve compiled a list of our most frequently asked reverse mortgage questions. Along with reading the information below, we recommend speaking with your financial advisor or calling one of our licensed specialists.
Q: Will I still own my home?
A: Yes, you will still own your home. Just like a regular mortgage, your name will remain on the title. You are still responsible for paying property taxes and homeowners insurance and maintaining the home.
Q: If I already have a mortgage can I still receive a reverse mortgage?
A: Yes, you can receive a reverse mortgage even if you have an existing mortgage. In fact, your reverse mortgage will first pay your existing mortgage if you have one.
Q: Do I need a strong credit score to receive a reverse mortgage?
A: No. At this time, there is no credit score requirement for a reverse mortgage. However, a financial assessment process will be conducted in order to ensure that you will be able to meet all necessary obligations such as property taxes, homeowners insurance, and home maintenance.
Q: What will happen if I have a poor credit history?
A: While credit score is not a qualifying factor at this time, the lender will look at credit history as part of the financial assessment. The homeowner has certain financial obligations after their loan closes. They must continue to pay their property taxes and homeowners insurance and maintain the home. If they do not stay current on their property taxes and homeowners insurance, they could face foreclosure and the loan could come due. To prevent this from happening, the lender looks at credit history to determine if the client will be able to uphold those financial obligations.
Those with a weak credit history may still be able to receive a reverse mortgage. If it is determined that the homeowner cannot uphold these responsibilities on their own, will be established. Much like an escrow account, the LESA takes the burden of responsibility from the homeowner for a given amount of time or through the life of the loan. The LESA takes the required amount from reverse mortgage proceeds to pay for such obligations as property taxes, homeowners insurance, and maintenance expenses.
Q: What if my home sells for less than what I owe on the loan?
A: Because the reverse mortgage is a non-recourse loan insured by the federal government, you will never owe more than your home is worth once the loan becomes due and payable.
Q: Who is eligible for a Home Equity Conversion Mortgage (HECM)?
A: Homeowners age 62 and older who have sufficient equity in their home and capable of meeting their financial obligations will be eligible for a HECM.
Q: What types of homes are eligible?
A: The home must be a single-family home or 2-4 unit home with one unit occupied by the borrower. Condominiums and manufactured homes that are approved by HUD and FHA may also be eligible.
Q: Are there limits on how I can spend the money I receive?
A: If you have an existing mortgage, that will have to be paid off first. Otherwise, you are free to use the remaining money as you like.
Q: Can I lose my home if I live longer than expected?
A: No. The loan will only become due and payable after you move out, sell the home, or pass away.
Q: What is the maximum amount I will be able to receive?
A: Available funds depend on a wide variety of factors such as the appraised value of your home and your current age. However, regardless of home value, the absolute maximum payment that a borrower can legally receive is capped at $636,150 at this time.
Q: What is reverse mortgage counseling and why is it necessary?
A: To ensure that borrowers receive fair and non-biased information, all borrowers must go through counseling with a professional reverse mortgage counselor. This is the first step all potential borrowers will undergo in order to make a more informed decision.
Q: What is the appraisal process?
A: In order to fairly assess the value of your home, an appraisal must be conducted. During this process, a licensed third-party appraiser will visit your home and conduct an inspection. After comparing your home with others in the area, the appraiser will determine the final value.
Q: How long does the reverse mortgage application process take?
A: From start to finish, the application process will take about 30-45 days on average. However, keep in mind that everyone’s situation (and amount of paperwork) is different.
Q: What happens if I change my mind?
A: Thanks to the right of rescission, you will have three business days to completely cancel the loan if you are not satisfied with your decision.
Q: How many ways can I receive my money?
A: The reverse mortgage allows you to receive your money through a lump sum, monthly payments, a line of credit, or any combination of the three. It depends on what reverse mortgage product you choose.