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Frequently Asked Questions:
- What is a Reverse Mortgage?
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A Reverse Mortgage is a federally-insured program with no income or credit requirements that allows a homeowner of at least 62 years of age to access the equity in their home without having to make a mortgage payment.
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- What is the application process?
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INFORMATION GATHERING: Call us for an educational brochure answering the most common questions senior homeowners have about the Reverse Mortgage program. Contact us by calling, faxing or submit your request on-line at our website for a Custom Analysis to determine how much home equity is available to you.
COUNSELING: HUD requires you to discuss the program in a free, informal session with a HUD/FHA certified Reverse Mortgage counselor. Call us to find a counselor in your area.
APPLICATION: Our Loan Advisors will meet with you in the comfort of your home to obtain the necessary documents and signatures for the application. In order to be efficient and effective, it is important to provide the following documents at the time the application is taken:
- A clear copy of a valid Driver’s License or Picture ID for you and any co-borrower(s).
- A clear copy of your Social Security Card or something with your SS # such as Medicare card or any official document that lists your Social Security number.
- Original Counseling Certificate. If you have not attended a Counseling session, please call Academy Mortgage for the name of a counselor near you. The application cannot be submitted without the original counseling certificate.
- A copy of your Homeowners Insurance Policy (Declaration Page).
- A copy of your recent Mortgage Statement(s).
- If there is a deceased spouse on the title, please provide a copy of the Death Certificate.
- Signed original Ownership Interest Certification (if applicable)
- If it is a condo, get the name and phone number of the management company so that we can put the mortgage clause on the Master Policy.
- For a Planned Urban Development (PUD) get a copy of the owner’s policy.
- In Florida, if a survey of the property has been done, get a copy.
PROCESSING: Your Loan Advisor will work with a Processing Specialist and title company to obtain the necessary appraisal, title, credit report and mortgage payoff data if one exists on your property. Your Processing Specialist may contact you during processing and underwriting to obtain additional information or clarification. The Underwriting Department will provide us with initial approval and conditions. After the underwriting conditions have been cleared, the file will be cleared to close. There is a three-day Right of Rescission that begins the day after your loan closes. This gives you the opportunity to further review your documents. Saturdays are included in the Right of Rescission period.
CLOSING: Upon underwriting approval and receipt of the closing numbers from the title company, you will be contacted to schedule the closing time and to determine how you wish to receive the proceeds of your loan. Payments may be made to you as a Lump Sum Payment, Line of Credit, Tenure or Term Plan or any combination of these options. In most states the closing can be done in the comfort of your home.
FUNDING DATE: Four (4) business days after the signing of your Closing Documents (Saturdays included) your loan will be funded. Depending on the title company, funds can either be wired to your account or a check will be sent to you overnight.
LOAN SERVICING: Approximately 30 days after your Closing Date the Servicing Department will provide you with a Welcome Package. Information included in this package will discuss methods to obtain funds from a line of credit and any repair administration.
REPAYMENT: No payment is due as long as you or the co-borrower lives in the home.
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- If there are no payments, what are my responsibilities as a borrower with a reverse mortgage?
- You are required to pay your property taxes, keep current the property insurance, maintain the home and notify the lender if you will be away from the property for an extended period of time.
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- How Safe is a Reverse Mortgage?
- FHA HECM and FannieMae Home Keeper reverse mortgages are very safe! HUD/FHA and FannieMae guarantee that the payments are made to you and you stay in your home as long as you like and that you and your heirs will never owe more than your home's net worth.
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- Can a Reverse Mortgage be taken out if I have a current mortgage on my home?
- Yes. The existing mortgages will be paid off at closing. The proceeds from the reverse mortgage pay the remaining mortgage balance.
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- Will they take my house?
- No. The house remains in your name and the lender is only repaid the loan balance or home value; never more than what the house is worth.
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- What are the fees associated with a reverse mortgage?
- First, most fees connected with a Reverse Mortgage loan can be included in your loan balance -- your out-of-pocket costs are normally zero.
The types of fees included are the origination fee; appraisal & credit report, title examination, binder & insurance, flood certification, city/county and state recordation taxes, court recording fees, and reverse mortgage legal document preparation fee; and a settlement fee to the closing agency or attorney. In addition, HUD/FHA charges a 2% mortgage insurance premium on the HECM loan.
The fee schedule of the closing costs should be provided to you in a detailed Good Faith Estimate (GFE) when you initially request information about a reverse mortgage and also at the time of application.
The only fee that may be collected in cash from you at the time of service is $350-$450 to pay an FHA-certified appraiser to prepare an appraisal report. This fee can be reimbursed to the borrower in cash out of the loan proceeds at settlement/closing. They cannot be reimbursed if you do not go to settlement/closing.
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- When does the loan become due and payable?
- The loan is due and payable when the last remaining borrower sells the property, permanently leaves the home, or passes away. Until these events take place you live in the home and make no payments to the lender.
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- What is due when the loan is repaid?
- The borrower will pay back the financed closing costs, the amount used to pay off any mortgage payment at the time of closing, any cash amounts received during the term of the loan plus accumulated interest.
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- Will I ever owe more than my home is worth?
- The federal government guarantees protection to your heirs through the Mortgage Insurance Premium. All reverse mortgages are "non-recourse" loans, which means that the borrower can never owe more than the value of the home regardless of loan balance.
If the Reverse Mortgage balance ever grows to exceed the value of the home when the last co-owner dies, sells, or moves; then the difference is paid to the mortgage company by HUD/FHA or by FannieMae. The amount owed by you or your heirs is limited to the net sale value of your home. Neither you nor your heirs have any personal liability beyond the net sale value.
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- Do I or my heirs have to sell the property to repay the loan?
- No, the Reverse Mortgage can be refinanced by a conventional mortgage loan. or your heirs may use other financial means for repayment (e.g.: life insurance proceeds or refinancing) and keep the home in the family. That is their choice. Your remaining assets are completely protected and cannot be touched --- even if you have no equity remaining in the home when you die.
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- Does the Mortgage Company take over Ownership of my Home?
- No! You retain ownership in your home. A lien is placed on your property and is recorded in the local county or city courthouse. This lien is the security for the Reverse Mortgage loan, but you retain ownership of your home. Your heirs must refinance this loan or they must dispose of the property and repay this debt when you die, sell, or permanently move out of the property.
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- What happens if one of the joint borrowers die?
- The surviving borrower receives the same monthly income or access to the remaining funds in the line of credit. That borrower can continue to receive funds from the line of credit until those funds are exhausted.
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- How will this affect my heirs and their inheritance?
- Depending on how long you participate in the reverse mortgage program, the home equity is preserved for your heirs to inherit. When the loan balance (consisting of funds received, plus the interest and fees added over time) is repaid, the remaining equity stays with your estate.
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- How do the proceeds affect my taxes or public benefits?
- Taxes:
Reverse Mortgages are the proceeds of a loan and are not taxed as income. Please consult your tax advisor regarding tax policies for your state, or local government. The interest accruing on the Reverse Mortgage loan cannot be deducted from your taxable income by IRS rules.
Social Security and Medicare:
A Reverse Mortgage loan does not affect your rights or benefits under Social Security or Medicare.
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- What about a home in a "living trust"?
- While the trust documents are subject to review, a homeowner whose home is in a living trust can usually take out a reverse mortgage.
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- What happens if I want to sell my home or move?
- If you sell your home or permanently move out, the loan balance needs to be repaid. The program does not restrict your decision to sell your home. "Permanently move out" is defined very clearly in all of the Reverse Mortgage documents that you will sign at closing/settlement as "all borrowers are absent from the home for more than 12 consecutive months."
Therefore, when you do decide to sell or permanently move, you will be required to repay the reverse mortgage loan balance in full -- or up to the net sale value of the home, if that is lower. If any equity remains in the home, then you will decide what you wish do with that equity.
You will never have to use other assets to repay your reverse mortgage loan. FHA will pay the mortgage company any deficit on your behalf.
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- Can I change the names on the title after closing?
- Changing the names on the title can make the loan become due and payable. The loan is based on the ages of the borrower’s and their life expectancy.
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