Get the Answers to Your Reverse Mortgage Questions


What is a reverse mortgage loan?

  • It's a home loan that enables you to convert a portion of your home equity into potentially tax-free funds.
  • Unlike traditional mortgage, you do not need to repay the loan as long as you or one of the borrowers continues to live in the home, keep the taxes and insurance on the property current, maintain the property to FHA standards and all other program requirements are met.


Why get a reverse mortgage loan?

  • A reverse mortgage loan can give you access to your home equity without the burden of monthly mortgage payments as a traditional mortgage.
  • Again, unlike traditional mortgage, you do not need to repay the loan as long as you or one of the borrowers continues to live in the home, keep the taxes and insurance on the property current, maintain the property to FHA standards and all other program requirements are met.
  • Reverse mortgage loan proceeds may be used for any purpose, including:
    • Meeting daily or monthly expenses
    • Covering healthcare costs
    • Remodeling or home repairs
    • Consolidating credit card debt
  • Refinance your existing mortgage to a reverse mortgage loan, without making the monthly mortgage payments of a traditional mortgage.  With the reverse mortgage loan for purchase feature, the loan proceeds may be used to help you buy a new primary residence better suited to your needs.
  • With the reverse mortgage loan for purchase feature, the loan proceeds may be used to help you buy a new primary residence better suited to your needs.


How are the reverse mortgage loan proceeds disbursed?

There are several distribution options to receive your reverse mortgage proceeds:
  • Lump sum - a specific amount is made immediately available (required and only available with a fixed-rate reverse mortgage loan).
  • Term - funds are released in fixed monthly amounts for a set period requested by the customer with a variable-rate reverse mortgage line of credit.
  • Tenure - funds are distributed in equal monthly advances for as long as at least one borrower continues to occupy the home as a principal residence with a variable-rate reverse mortgage line of credit.
  • Line of credit - funds remain available for the borrower to draw on as needed or in automatic monthly disbursements.
  • Combination - with a variable-rate reverse mortgage, choose any combination of lump sum, monthly advances or line of credit disbursements; even receive an initial lump sum and leave the rest in a line of credit.  Change the way proceeds are received as often as you wish, provided sufficient loan proceeds are available.


How much can I borrow?

The amount that can be borrowed is determined by a HUD formula that is based on the following factors:
  • The age of the youngest borrower
  • The appraised value of the home
  • The current interest rate
  • The established lending limit


What are the interest rate options?

Family First provides both fixed-rate and variable-rate reverse mortgage loans.

  • With a fixed-rate reverse mortgage loan, your interest rate will remain the same throughout the life of the loan.
    • You would receive a lump sum of distribution.
  • With a variable-rate reverse mortgage loan, the interest rate may adjust monthly or annually.
    • The frequency at which your interest rate adjusts will not affect the number of loan advances you receive, but will affect how fast or slow your loan balance grows.
    • You can change your distribution options as often as you'd like.


How does a reverse mortgage loan differ from a traditional mortgage?

With a traditional mortgage or home equity loan:

  • Borrowers qualify based on their income, employment and credit score.  These loans require the borrower to repay the amount borrowed by making monthly mortgage payments over a specified term to the loan servicer.

With a reverse mortgage loan:
  • There are no income, employment or credit score qualifying restrictions.1
1 Reverse mortgage borrowers are required to obtain an eligibility certificate by receiving counseling sessions with a HUD-approved agency. Family members are also strongly encouraged to participate in these informative sessions.
 

What types of properties are eligible for a Reverse Mortgage?

  • Family Homes: Single-family homes are eligible for reverse mortgages. Multifamily homes can also qualify if they have no more than four units and the borrower is using one of the units as his primary residence. A primary residence is defined by the Department of Housing and Urban Development, or HUD, the federal agency which oversees the FHA, as being the place where the borrower lives for the majority of the year.

  • Community Properties: Someone who owns a condominium or townhouse can receive a reverse mortgage, but for condominiums, the development has to be approved by HUD. A home in a planned unit development, known as a PUD, is also eligible. PUDs are communities built by developers with common areas that all residents share, such as a park or recreational center. These housing communities are legally similar to townhouses, but can be different in structure and carry different levels of owner responsibility. PUDs are usually single family homes or a mix of both single and multiunit homes, while townhouses can share common walls. Typically, major repairs to townhouses are the obligation of the homeowner's association, but in a PUD, the homeowner is responsible for repairs.

  • Manufactured Homes: Manufactured homes, where the pieces of the home were built in a factory and later assembled on site, are eligible for reverse mortgages as long as the residence meets FHA requirements. The home must have been built after June 1976, be attached to permanent framework, have a floor area of at least 400 square feet, and meet the FHA safety and flood standards. A manufactured home must also be classified and taxed as real estate in the area where the home is located.

  • Cooperative Housing: These property types are currently not eligible for reverse mortgage financing.

 

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