How do I qualify for a reverse mortgage?

To become eligible for a reverse mortgage you must be at least 62 years old and own your own home. You must also have equity in your house to pay off any outstanding balances, and your home must be occupied as your principal residence.

How much money can I get?

The amount of money that a lender will loan depends upon how old you are at the time of closing, how much your house is worth, the total amount of liens and current interest rates. The type of reverse mortgage product and the payment options can also affect the amount of money you will receive.

How do I receive my money?

There are several options to choose from. You can take the money in a lump sum, set up a line of credit, monthly payment, or a combination of the three.

What costs are associated with a reverse mortgage?

The costs of a "forward" loan are very similar to a reverse loan. For example, an origination fee is paid to the broker/lender, and a Mortgage Insurance Premium (MIP) is paid to HUD on the Home Equity Conversion Mortgage (HECM). There is also an appraisal fee, a flood certification fee, a document preparation fee, title and settlement fees and other standard closing costs associated with a reverse mortgage.

Do I get taxed on the money I receive from my reverse mortgage?

The equity in your home is considered your money and not additional income; therefore all the funds from a reverse mortgage are tax-free.

Is it required that I receive counseling before getting a reverse mortgage?

Yes, counseling is required to protect borrowers from receiving incorrect information about reverse mortgages. The lender must be in receipt of the counseling certificate before they can close the loan. To locate a reverse mortgage counselor near you, contact your loan officer or your local HUD office.

Do I have to pay any fees to the reverse mortgage lender during the course of my loan?

A reverse mortgage was created so borrowers don't have to pay fees during the course of the loan. However, there is a monthly servicing fee, which is deducted from the account for every month during the life of the loan.

Am I responsible for paying my homeowners insurance and property taxes?

Yes, both must be kept current at all times. If you choose, and if loan proceeds are available, the lender can impound your taxes and pay them for you when they become due.

Does my house have to be in prime condition in order for me to receive a reverse mortgage?

An appraiser will appraise the house following FHA guidelines or the lender's guidelines depending upon the reverse mortgage program. If the house needs to be repaired, the lender may require you to fix it prior to closing. A repair set-aside may be issued if they allow you to repair the home after closing.

What is repair set-aside?

If repair work is done after the close of escrow, the lender will hold one and a half times the amount of money it costs to repair the item. Once the work has been completed, a final bill will be submitted to the lender, which will disburse payments to the appropriate parties.

Am I limited as to how I can use the money I receive from a reverse mortgage?

You can use the money however you like. Borrowers have used a reverse mortgage for vacations, home modifications, healthcare, education for grandchildren, new cars and to supplement retirement income. It's your money to do with as you wish.

If my spouse isn't 62, will they remain on the title?

All parties on the title must be at least 62 years of age in order to receive a reverse mortgage. If you are considering removing someone from the title to obtain a reverse mortgage, please seek legal counsel and a tax consultant regarding your particular scenario.

Does a non-borrowing spouse need to sign any documents?

Yes. A non-borrowing spouse must sign a Non-Borrowing Spouse (NBS) Certification, Notice of Right to Cancel Riders (if necessary), Truth in Lending, the HUD and the Deed(s) of Trust. If there is a trust on the property, additional signatures may be required.

In 2009, the Obama Administration kicked off a new program aimed at helping seven to nine million homeowners stay in their homes. Called the "Making Home Affordable" program, it is designed to help responsible homeowners in one of two ways: refinancing their mortgages or modifying their loan to achieve lower monthly payments.

The Home Affordable Refinance Program

The refinance portion of the program is estimated to be available to four to five million homeowners who aren't able to refinance their home and take advantage of historically low interest rates because the value of their home has decreased below the amount of the mortgage.

To qualify, homeowner's must:

• Be current on mortgage payments and have a solid payment history (cannot have been more than 30 days late on a payment within the last year)
• Have a loan owned or guaranteed by Fannie Mae or Freddie Mac
• Prove their ability to afford the new mortgage debt
• Have a mortgage balance of no more than 125% of the current estimated value of their home

The Home Affordable Loan Modification Program

The loan modification portion of the program is estimated to be available to three to four million at-risk homeowners having trouble making their monthly mortgage payments due to an increase in their interest rate or loss of income. The government plans to reach out to mortgage servicers and greatly encourage their participation. For this program, missed payments or current bankruptcy proceedings do not necessarily disqualify a homeowner.

The program provides clear and consistent guidelines for loan modifications and has many incentives to encourage the participation of mortgage servicers. The modification sequence will require servicers to first reduce the interest rate (subject to a rate floor of 2%), then, if necessary, extend the term of the loan up to a maximum of 40 years and, finally, forbearance of principal (partial reduction of amount owed) if necessary.

For homeowners to qualify for participation, they must:

• Have a loan servicer willing to accept modification; your loan servicer is not necessarily your original lender, but may be a company that has contracted the "servicing rights" to your mortgage and now collects payment from you
• The home must be an owner-occupied, single family one to four unit property (including condominium, cooperative, and manufactured home affixed to foundation and treated as real property under state law)
• Have mortgage payments equal to more than 31% of their pretax monthly income
• Be able to prove hardship (e.g., lost job or income, steep home valuation decrease, etc.)
• Have an unpaid principal balance on the home loan of equal to or less than:
  • One Unit: $729,750
  • Two Units: $934,200
  • Three Units: $1,129,250
  • Four Units: $1,403,400
• Have a mortgage originated (created) on or before January 1, 2009
• Make all modified payments over a trial period of three months or more

The program also features alternatives to foreclosure to help homeowners who may not qualify for the refinance or loan modification programs. Additionally, the program provides home price decline protection incentives to encourage additional modifications by lenders in areas where home prices have been falling. Visit www.financialstability.gov and www.makinghomeaffordable.gov for complete details or to see if you are eligible for the "Making Home Affordable" program. Don't hesitate to ask your mortgage provider to find out if they are participating.

What is title insurance?

Title insurance is an insurance policy issued by a title insurance company to the buyer of real estate and his/her lender. For a one–time premium paid on the date of closing, it agrees to defend the title of the property and to reimburse the owner or lender for any loss suffered up to the policy limits because of any undiscovered defects in the title to the property.

Why do I need title insurance?

The purchase of a home is sometimes the single largest investment one would make. Who would protect you if your interest in the property itself was impaired due to a lien or claim in which the validity of your ownership was questioned? Claims arise from title defects such as, but not limited to, undisclosed heirs, recording mistakes, incorrect legal descriptions, outstanding mortgages and lost or forged deeds. If there is a title defect, you could lose your property, but the simplest and most efficient way to protect yourself from these defects is the purchase of title insurance.

What title insurance protects against?

Here are just a few of the most common hidden risks than can cause loss of title or create an encumbrance on title:

• False impersonation of the true owner of the property
• Forged deeds, releases or wills
• Undisclosed or missing heirs
• Instruments executed under invalid or expired power of attorney
• Mistakes in recording legal documents
• Misinterpretations of wills
• Deeds by persons of unsound mind
• Deeds by persons supposedly single, but in fact married
• Liens for unpaid estate, inheritance, income or gift taxes

What protection does title insurance provide against defects and hidden risks?

Title insurance will pay for defending against any lawsuit attacking the title as insured, and will clear up title problems or pay the insured's losses. For a one-time premium, an owner's title insurance policy remains in effect as long as the insured, or the insured's heirs, retain an interest in the property, or have any obligations under a warranty in any conveyance of it. Owner's title insurance, issued simultaneously with a loan policy, is the best title insurance value a property owner can get.