Home

About Us

Contact Us

Reverse Mortgage Types

Closing Costs

Counseling

Mortgage Insurance

How to Apply

Free Analysis

Frequently Asked Questions

Links

 

Frequently Asked Questions

By Kenneth W. Terrill
President, Founder of Reverse Mortgage Experts and American Mortgage Professionals

Since 1994 American Mortgage Professionals has provided thousands of seniors in Alaska, Arizona, California, Florida, Nevada, and Oregon with FHA-insured reverse mortgages. Here are answers to the most common questions we hear.

1. Am I signing my house over to the Government?
Answer: Absolutely Not!! You can sell at any time, pay off the Reverse Mortgage at any time, or increase your available credit line by paying money into it. Any equity in your home is yours or your heirs to do with as you choose. Neither the lender or HUD/FHA share in your equity.

2. What happens when I die?
Answer: Your heirs have choices. They can refinance the property, pay off the reverse mortgage, and retain title to the family home. They can sell the property for fair market value, pay off the Reverse Mortgage and receive any remaining equity at the close of escrow. If feasible, they can pay the balance due from other assets in your estate.

3. What if I die owing more on the house than its Market Value?
Answer: A Reverse Mortgage is a “Non Recourse” instrument. In plain language that means the lender agrees to accept title to the property in full satisfaction of the debt.
The remainder of your estate passes to your heirs unaffected by the Reverse Mortgage balance. Your heirs have no obligation for any deficiency balance after the sale.

4. Can I outlive a Reverse Mortgage?
Answer: No. Your benefit is guaranteed by HUD, FNMA, or the Lender at the time you take out your Reverse Mortgage. If you select monthly income it is guaranteed to age 100 of the youngest applicant. If you select the credit line option the amount available will be there for you no matter what happens to the value of your property. In addition the credit line has a built-in growth factor of approximately 6.0% per year.

5. What is the Insurance I’m paying to H.U.D. all about?
Answer: H.U.D. collects an upfront Mortgage Insurance Premium. Additionally there is ½ of 1.00% insurance premium collected by H.U.D. annually on your outstanding principal balance. This insurance premium is retained by H.U.D. to protect the lender against losses incurred when a Senior Citizen passes owing a balance on their Reverse Mortgage that exceeds the value of the property. Refer to the “Non Recourse” section of the answer to question #2.

6. How much can I get?
Answer: There is no simple answer to that question. Reverse Mortgage Benefits are calculated using a combination of factors:

• The value of your home.
• The Maximum H.U.D. Loan Amount in your County of Residence.
• The attained age of all borrowers.
• The statistical life expectancy of all borrowers.
• An applied Property Value Appreciation rate of approximately 4.0%.

Our company provides free benefits analysis on request. All we need is your Zip Code, the approximate value of your property, your ages, the amount of the existing mortgage if any, and a name to identify you.

7. How does my age affect my potential benefit amount?
Answer: The older you are the higher your benefit will be. That is because your statistical life expectancy shortens as you grow older. A 62-year old has a longer life expectancy than a 75-year old; hence the benefit is more for the 75 year old.

8. Why doesn’t H.U.D. take the full value of my home into account?
Answer: H.U.D. establishes maximum loan limits for each county in each state. These limits change annually in step with market conditions. H.U.D. uses either the lower of the appraised value of your home or the maximum H.U.D. loan limit in calculating your benefit. If your appraised value exceeds H.U.D. loan limits the excess value is ignored in the Benefit Calculation. It may not seem fair but that is the way the program is structured.

9. I’ve gotten several quotes. Why are they all about the same?
Answer: Much of the cost of obtaining a Reverse Mortgage is fixed. Interest rates are established by H.U.D.’s formula and are exactly the same no matter which provider you choose. The only negotiable items are the monthly service fee and the Loan Origination Fee. There may be some very minor fluctuations in the cost of Escrow, Title Insurance, etc. Look at the total estimated closing costs when selecting a provider. Not all lenders charge the same Monthly Service Fee or Origination Fee. Beware of lenders that understate the HUD/FHA Insurance Premium or artificially manipulate the software to show a lower starting interest rate. You can determine the real starting rate by visiting www.reversemortgage.org which is the web site of the National Reverse mortgages Lenders Association. We are a proud member & abide by the code of conduct.

10. Why do I need Counseling before I apply?
Answer: H.U.D. wants you to be an informed consumer. Independent third party counseling is required before you can apply for a Reverse Mortgage. The counselor has been trained to answer your questions about Reverse Mortgages, provide an independent Benefit Analysis, and provide a professional opinion about the advisability of a Reverse Mortgage as it applies to your situation. Not everyone likes it but Counseling is a requirement we have to deal with. Counseling is usually provided at no cost to the Senior Citizen. For a counseling referral you can call 1-800-308-2227 nationwide.

11. Why are a Termite Inspection & Appraisal Required?
Answer: The pest control inspection is a requirement for every H.U.D. insured loan.
H.U.D. requires that properties it insures loans on meet certain minimum property standards. The Pest Control Inspection and the H.U.D. Appraisal identify any potential
Structural deficiencies, pest infestations or safety hazards. Remediation is required as a condition of loan approval. Costs can be paid from loan proceeds.

12. Are any advance application fees required?
Answer: H.U.D. does not sanction the collection of application fees. Some lenders may ask you for a fee deposit to cover the cost of the appraisal. We prefer you either pay the H.U.D. Appraiser directly when the inspection is done or have the appraisal fee paid from escrow at closing. We do not collect application fees of any kind. Be wary if you are asked for money as a condition of making application for a Reverse Mortgage.