Update on COVID-19

Finance of America Reverse LLC (“FAR”) understands you may be facing unique hardships during this difficult time. Many borrowers who are currently experiencing financial distress related to COVID-19 may be eligible for some type of assistance. Please contact us for information regarding options that may be available to you. If you are impacted by COVID-19, please call 866-654-0020 and have your loan number ready for the Customer Service representative.

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There are several factors involved to qualify for a reverse mortgage.

  • You must be 60* years or older
  • You are not delinquent on any debts owed to the federal government
  • You must have a significant amount of equity in the home or own it out-right
  • You must live in the home as your principal residence
  • You must be able to continue paying property taxes and other costs associated with the home (maintenance, insurance, HOA fees, etc).**

*For certain HomeSafe® products only, excluding North Carolina, Texas, and Utah where the minimum age is 62.

**There is a financial assessment when applying for a reverse to determine whether the applicant has the willingness and capacity to afford reverse mortgage obligations including property taxes, homeowners insurance, and other property charges they might have. If the lender finds that a loan applicant does not have adequate cash flow to uphold the mandatory obligations of the reverse mortgage, they may require what is known as a Life Expectancy Set-Aside, or a “LESA,” for short.

There are several requirements to maintain a reverse mortgage agreement.  Aside from maintaining the home in a state of good repair, there are two additional stipulations:

  • The home must be your principal residence
  • You must stay up-to-date on all property charges such as property tax and homeowners insurance

To qualify for a reverse mortgage, you will have to have a significant amount of equity built-up in the home. There is no specific amount of equity needed and you can get a reverse mortgage even if you have an existing mortgage. The proceeds from the reverse will pay it off and the balance is incorporate into the amount borrowed. As a rule of thumb, you should have 50% equity or more in your home for a reverse mortgage. This is because you must use the reverse mortgage proceeds to pay off your existing home loan first. If you own less than 50%, the proceeds of your reverse mortgage won’t cover that gap.

With a HECM or HomeSafe for Purchase, your new home down payment is typically between 45% and 62% of the purchase price, depending on your age or your eligible non-borrowing spouse’s age, if applicable.

The rest of the funds for the purchase come from the HECM or HomeSafe loan. This allows you to keep more assets to use as you wish, as compared to paying the down payment with cash, while still having no required monthly mortgage payments.

The short answer is yes. However, the situations that lead to a reverse mortgage foreclosure are typically much different than traditional mortgage foreclosures. When homeowners think of foreclosure, they think of the most common reason traditional (forward) loans end in foreclosure – failure to make the required monthly mortgage payment. Of course, that wouldn’t make sense with a reverse mortgage that carries no monthly repayment obligation.

 

So, it’s understandable why homeowners, their heirs, and the media are often confused when they see that reverse mortgage foreclosures happen from time to time. Its important to note that a foreclosure can be the natural resolution of a reverse mortgage after the borrower passes away. If the balance due exceeds the home’s value, or there is no next of kin to handle a sale, the estate will simply allow the home to go into foreclosure. Let’s take a deeper look into factors that can lead to this outcome.

 

Yes YOU can! A HECM (Home Equity Conversion Mortgage) reverse mortgage for Purchase, or or HomeSafe for Purchase, FARs proprietary reverse mortgage for purchase, are tools that allows borrowers to purchase a new home with a reverse mortgage loan. The process is similar in some ways to using a forward mortgage to purchase a new home. The borrower still needs to work with a real estate agent on the transaction, and many of the same closing costs and timeframes apply.

Older homeowners often find themselves wanting (or needing) to RELOCATE to be closer to family members, DOWNSIZE to a more manageable home, or even UPSIZE to a retirement dream home on the beach, golf course, or active adult community. The reverse mortgage for purchase tool can be an ideal solution for accomplishing your retirement relocation goals.

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