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Klamath Falls Reverse Mortgage Question - What kind of home can I buy with a Reverse Mortgage?

04-08-11
Sharon Falvey - Oregon Reverse Mortgage Specialist and Home Equity Expert
Sharon Falvey - Oregon Reverse Mortgage Specialist and Home Equity Expert: Loan Officer in Portland, OR
  • view my blog
  • Office: (541) 891-5706

What kind of home can I buy with a Reverse Mortgage?

That is a great question and for the answer we will need to look to the FHA Guidelines regarding suitable property. Any home that qualifies for forward (traditional) FHA loans will be acceptable for FHA Reverse Mortgage financing.

The following eligible property types must meet all FHA property standards and flood requirements:

Manufactured Home

Single Family Homes (1 to 4 Unit)
FHA Approved Condominiums
Manufactured Homes that meet FHA Standards (permanent foundation on owned land)


However not all homes in any of the categories above may qualify. You will want to work with an experienced reverse mortgage consultant who is familiar with the HECM For Purchase.

Individual lenders may also have thier own stricter guidelines called “overlays”. (Example - Some may not be willing to loan on 2 to 4 unit multiple family dwellings) Be sure to ask your RMC if the type of home you want is one they can loan on.

Some “unique” single family homes may not qualify for FHA financing. For example, geodesic dome homes may not qualify if they cannot be shown to be marketable and there are no recent comparable sales in the immediate area.Dome Home

Reverse Mortgage for purchase can be a great way to buy your dream retirement home. It gives you more purchasing power than an all cash transaction with the same benefit of no required monthly mortgage payments. Of course you must always pay your property taxes, insurance and Homeowners Association dues (if any), and maintain your home. Probably exactly as you would do if you paid cash!

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Southern Oregon Reverse Mortgage Question - Can I get a reverse mortgage if my property is in a trust?

02-21-11
Sharon Falvey - Oregon Reverse Mortgage Specialist and Home Equity Expert
Sharon Falvey - Oregon Reverse Mortgage Specialist and Home Equity Expert: Loan Officer in Portland, OR
  • view my blog
  • Office: (541) 891-5706

Dog & Cat





Southern Oregon Reverse Mortgage Question - Can I get a reverse mortgage if my property is in a trust?


Most of the time the answer is yes.

The trust must be revocable and all beneficiaries of the trust must be eligible borrowers. The trustee must have the power to encumber real property (get a loan on real estate). You will need to provide your lender with a complete copy of the signed, notarized Declaration of Trust, all amendments and Exhibit’s. The trust will have to be reviewed by the title company and lender to be sure that the proper language is there.


"All beneficiaries of the trust must be eligible HECM borrowers at the time of origination and until the mortgage is released [i.e. borrower/beneficiary must occupy the property as a principal residence and new beneficiaries may not be added to thetrust]. Contingent beneficiaries, that receive no benefit from the trust nor have any control over the trust assets until the beneficiary is deceased, need not be eligibleHECM borrowers.
2) The trustee must sign the mortgage, and the mortgage must be signed by each borrower/beneficiary if necessary to create a valid first mortgage. The borrower/beneficiary must sign the Note and Loan Agreement. The lender may require the signature of the trustee on the Note or the signature of the borrower/beneficiary on the mortgage.
3) The trust shall not be a party to the Loan Agreement. The borrower/beneficiary may issue instructions to the lender to permit the trustee to exercise one or more rights stated in the Loan Agreement on behalf of the beneficiary; i.e. the right to receive loan advances or to request changes in the payment plan.
4) The lender must be satisfied that the trust is valid and enforceable, that it provides the lender with a reasonable means to assure that it is notified of any subsequent change of occupancy or transfer of beneficial interest, and ensures that each borrower/beneficiary has the legal right to occupy the property for the remainder of his or her life."

I hope that you found this information helpful, and as always, I appreciate your comments and feedback.

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Reverse Mortgage Question from Klamath Falls - What is MIP?

02-08-11
Sharon Falvey - Oregon Reverse Mortgage Specialist and Home Equity Expert
Sharon Falvey - Oregon Reverse Mortgage Specialist and Home Equity Expert: Loan Officer in Portland, OR
  • view my blog
  • Office: (541) 891-5706

Reverse Mortgage Question from Klamath Falls - "Sharon, what is MIP?"

MIP is an acronym for Mortgage Insurance Premium. It is the cost of the insurance policy that is purchased at the time of funding an FHA (another acronym) loan. MIP is charged in both forward and reverse FHA loans.

Purpose of MIP

Traditionally this insurance protects the lender against a loss on the loan if the home is foreclosed on and unable to sell for the balance owed. It is all of that and has an additional function in the reverse space. That function is in the event the lender is unable to fulfill it’s obligations to the borrower, FHA can and will step in to fulfill them. For example, if the bank is unable to make the monthly payment to the senior because a natural disaster shut down their servicing center - FHA will step in and make that payment.

In a HECM reverse mortgage MIP protects the lender and the borrower!


Upfront Cost of MIP

2% of the appraised home value or FHA Lending Limit (whichever is less) on a HECM Standard reverse mortgage, ($6,000 on a $300,000 home)

or

.01% of the appraised home value or FHA Lending Limit (whichever is less) on a HECM Saver reverse mortgage, ($30 on a $300,000 home)


Ongoing Cost of MIP

An annual premium of 1.25% of the current outstanding loan balance paid monthly.Mortgage Insurance makes any loan less risky.

Less Risk = Lower Rates

Higher Risk = High rates.


That's why FHA loans have competitive rates even with a negatively amortizing loan like a reverse, or a low down payment program like the traditional FHA Mortgage. That is also why investors will purchase FHA loans - they are protected against loss.

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Klamath Falls Reverse Mortgage Question - How Much Can I Borrow? (I’m 66)

02-01-11
Sharon Falvey - Oregon Reverse Mortgage Specialist and Home Equity Expert
Sharon Falvey - Oregon Reverse Mortgage Specialist and Home Equity Expert: Loan Officer in Portland, OR
  • view my blog
  • Office: (541) 891-5706

Klamath Falls Reverse Mortgage Question - How Much Can I Borrow? I’m 66.Older Couple

For an personal estimate on reverse mortgage proceeds, contact a reverse mortgage consultant or a HUD Approved HECM Counselor. But - based upon rates available today, 2/1/2011 here is a sample scenario that might help to answer your question.

John and Jane Doe are both 66 years old and live in a home valued at $220,000.00. FHA Reverse Mortgages are availabe for principal residences only. They have a mortgage on their home with a current balance of $120,000.00 and 18 years left to pay. Their monthly principal and interest payments are $796.00 per month. A Reverse Mortgage uses 3 factors when determining the amount of funds available to borrowers.
  1. Age of the youngest borrower.
  2. Current Expected Rate.
  3. Appraised Home Value or Lending Limit, whichever is less.

These factors are used to determine the Principal Limit, and from that Principal Limit, closing costs and any required payoffs are deducted. Here is the example of what these imaginary borrowers could obtain.

$220,000.00 Home Value
$141,200.00 Principal Limit *
-$ 4,400.00 Subtract Upfront MIP (FHA Mortgage Insurance Premium)
-$ 3,300.00 Subtract Closing Costs (settlement, recording, appraisal, title insurance, etc.)**
-$120,000.00 Payoff current home loan. (Bye, bye house payment!) ***
$ 13,500.00 Loan proceeds to homeowner.

In this scenario, our homeowners are interested in the fixed rate reverse mortgage, because at the current expected rate on the adjustable reverse, they would not qualify for enough funds to payoff their mortgage and they do not wish to bring money to the table.

Be sure to consult with a qualified reverse mortgage consultant when checking out reverse mortgages for yourself or a loved one. There are also some great websites that I recommend you research, like FHA;s HECM Page, National Reverse Mortgage Lenders Association (NRMLA) and the National Council on Aging - check them out.

*Remember, this changes based upon age & expected rate so this number will be different based upon different expected rates. I am using a major lenders current published rates for a HECM Standard Fixed Rate Loan.

** Currently, many lenders have waived origination fees and service fees. So I am not including them on this scenario.

***Homeowners are responsible to keep taxes current, home insured and maintained.

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Klamath County - Reverse Mortgage Basics

01-13-11
Sharon Falvey - Oregon Reverse Mortgage Specialist and Home Equity Expert
Sharon Falvey - Oregon Reverse Mortgage Specialist and Home Equity Expert: Loan Officer in Portland, OR
  • view my blog
  • Office: (541) 891-5706


Hello Klamath County!Lower Klamath Lake

Let’s get started right off the bat with the basics about this often misunderstood “senior loan”.

FHA calls their reverse mortgage loan program the HECM - an acronym for “Home Equity Conversion Mortgage”. When you hear people talking about a “heck-um” they are talking about a reverse mortgage. This government insured program enables senior homeowners over the age of 62 to withdraw some of the equity in their home. The HECM is a safe plan that can give older Americans greater financial security. Many seniors use it to supplement social security, meet unexpected medical expenses, make home improvements and more. You can receive additional free information about reverse mortgages in general by contacting the National Council on Aging at (800) 510-0301 or downloading their free booklet, "Use Your Home to Stay at Home," a guide for older homeowners who need help now.

Here are the top 10 Frequently Asked Questions

1. What exactly is a reverse mortgage?

A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence or fail to meet the obligations of the mortgage. You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.

2. Can I qualify for FHA's HECM reverse mortgage?

To be eligible for an FHA Reverse Mortgage, FHA requires that you be a homeowner 62 years of age or older, and have enough equity that your current loan (if you have one) can be paid off at closing with proceeds from the reverse loan. You must live in the home and continue to live in it for the duration of the loan. You are also required to receive consumer information free or at very low cost from a HECM counselor prior to obtaining the loan. You can find a HECM counselor online or by phoning (800) 569-4287.

3. Can I apply if I didn't buy my present house with FHA mortgage insurance?

No problem. Your new FHA Reverse Mortgage will be FHA-insured.

4. What types of homes are eligible?

To be eligible for the FHA HECM, your home must be a single family home or a 1-4 unit home with one unit occupied by the borrower. HUD-approved condominiums and manufactured homes (post 1976) that meet FHA requirements are also eligible.

5. What's the difference between a reverse mortgage and a bank home equity loan?

With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home, sales price or FHA's mortgage limits, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you may borrow.

With a HECM, you don't make monthly principal and interest payments, the lender pays you according to the payment plan you select. You do have some very important obligations though - you still are required to pay your real estate taxes, insurance and other conventional payments like utilities. With an FHA HECM you cannot be foreclosed or forced to vacate your house because you "missed your mortgage payment."

6. When does my loan become due and payable?

A HECM loan must be repaid in full when you the last remaining homeowner no longer lives in the home, or...
You do not pay property taxes or hazard insurance or violate other obligations.
You permanently move to a new principal residence.
The last remaining borrower fails to live in the home for 12 months in a row. An example of this situation would be if the last borrower were to have a year long stay in a nursing home.
You do no longer maintain the property to FHA standards.

7. Will I still have an estate that I can leave to my heirs?

When you sell your home, you or your estate will repay the cash you received from the reverse mortgage plus interest and other fees, to the lender. Any remaining equity in your home, if any, belongs to you or to your heirs.

8. How much money can I get from my home?

The amount you can borrow depends on:

Age of the youngest borrower
Current interest rate
Lesser of - Appraised value of your home OR the HECM FHA mortgage limit for your area.
The initial Mortgage Insurance Premium (MIP) option you choose (2% HECM Standard option or .01% HECM Saver option)
You can borrow more with the HECM Standard option. Also, the more valuable your home is, the older you are, and the lower the interest rate, the more you can borrow. If there is more than one borrower, the age of the youngest borrower is used to determine the amount you can borrow. For an estimate of HECM cash benefits please shoot me an email. You can also check out an online calculator.
9. Should I use an estate planning service to find a reverse mortgage?

FHA does NOT recommend using any service that charges a fee for referring a borrower to an FHA lender. FHA provides this information free, and HECM housing counselors are available for free or at very low cost, to provide information, counseling, and a free referral to a list of FHA-approved lenders. Search online or call (800) 569-4287 toll-free, for the name and location of a HUD-approved housing counseling agency near you.

10. How do I receive my payments?

You have five options:

  • Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
  • Term - equal monthly payments for a fixed period of months selected.
  • Line of Credit - unscheduled payments or installments, at times and in amounts of your choosing until the line of credit is exhausted.
  • Modified Tenure - combination of line of credit with monthly payments for as long as you remain in the home.
  • Modified Term - combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.

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