What is a Reverse Mortgage?

A Reverse Mortgage is a special, FHA/HUD, government-backed loan that allows you to utilize the equity in your home and receive cash, a *tax-free monthly income, lump sum, monthly advancements and/or a line of credit. *Consult your personal tax advisor.

New for 2009: You may now use a reverse mortgage to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.

 

What does HECM mean?

HECM is an acronym for Home Equity Conversion Mortgage and is simply another name for a Reverse Mortgage.

 

What's the difference between a reverse mortgage and a bank home equity loan?

With a traditional second mortgage, or a home equity line of credit, you must have sufficient income versus debt ratio to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different in that it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, the lower the interest, the more you can borrow.
You don't make payments, because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes, insurance and other conventional payments like utilities. With an FHA HECM you cannot be foreclosed or forced to vacate your house because you "missed your mortgage payment."

 

Who can qualify for a Reverse Mortgage?

To qualify for a Reverse Mortgage you must be a homeowner at least 62 years of age or better, occupying your home as your primary residence, with substantial equity in your home.

Mortgage Amount Based On

• Age of the youngest borrower
• Current interest rate
• Lesser of appraised value or the HECM FHA mortgage limit

 

How does the program work?

If you are a homeowner age 62 or older and have paid off your mortgage or have only a small mortgage balance remaining, and are currently living in the home, you are eligible to participate in FHA's reverse mortgage program. The program allows you to borrow against the equity in your home. You can select from five payment plans:

• Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
• Term - equal monthly payments for a fixed period of months selected.
• Line of Credit - unscheduled payments or in installments, at times and in an amount of your choosing until the line of credit is exhausted.
• Modified Tenure - combination of line of credit plus scheduled monthly payments for as long as you remain in the home.
• Modified Term - combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.

You can change your payment options for a fee of $20.

Unlike ordinary home equity loans, a FHA reverse mortgage HECM does not require repayment as long as the home is your principal residence. Lenders recover their principal, plus interest, when the home is sold. The remaining value of the home goes to you or your heirs. You can never owe more than your home's value.
If the sales proceeds are insufficient to pay the amount owed, FHA will pay the lender the amount of the shortfall. FHA collects an insurance premium from all borrowers to provide this coverage.

The amount you can borrow depends on your age, the current interest rate, other loan fees, and the appraised value of your home or FHA's HECM mortgage limit for your area, whichever is less. Generally, the more valuable your home is, the older you are, and the lower the interest, the more you can borrow. If there is more than one owner, the age of the youngest owner is used to determine the amount you can borrow. For an estimate of HECM cash benefits based on your age, home value, and current interest rate, Please call Jeanine at (888) 500-5024.

There are no asset or income limitations in order for you to be eligible for a HECM. In addition, there is no limit on the value of homes qualifying for a HECM. The value of your home will be determined by an appraisal. However, the amount that you may borrow is derived from the lower of the appraised value or the FHA HECM mortgage limit for your area. For most areas, the HECM mortgage limit is $417,000. The $417,000 limit does not apply to parts of Hawaii, Guam and the Virgin islands, which may have higher limits. You are charged an upfront insurance premium of 2 percent of the maximum claim amount that may be borrowed plus a 0.5 percent annual premium.

 

Are there any income requirements or credit qualifications?

No, there are no income or credit requirements and no monthly payments to make while you remain in your home as your primary residence. A reverse mortgage loan is not due and payable until you no longer reside in your home as your permanent residence.

 

If there are no monthly payments, what are my responsibilities as a Borrower?

The Borrower is required to pay yearly property taxes, provide proper homeowners' insurance, maintain the home and notify the lender if you will be away from the property for an extended length of time. (Over 9 months)

 

What if I already have a current mortgage on my home?

An existing mortgage must be paid off at closing. The proceeds from your Reverse Mortgage can be used for this purpose. Any funds remaining after your existing mortgage is paid off will be the cash available to you.

 

What else can I do with the money?

You may supplement your income, finance home improvements, pay for medical expenses, pay off debt, purchase a new car, travel….The choice is yours!

 

How much money will I receive?

This is determined by your appraised home value, age of the youngest Borrower (at least 62) and the current interest rate. One of our representatives will be happy to assist you in calculating the maximum money available to you.

You may contact Jeanine Toll Free at 888-500-5024.

 

What costs are associated with a Reverse Mortgage?

Majority of the costs can be financed as part of your initial loan advance, meaning no out of pocket costs to you. Expenses typically associated with your loan include the cost of the appraisal, title insurance, loan origination, escrow and recording fees, and , depending on the counseling agency, the required *HECM Counseling session. We will be happy to provide you with a Good Faith Estimate (GFE) of related costs. *You may be required to pay the HECM Counselor up front. Please discuss your options with the counselor you select.

1. Appraisal Fee
An appraiser is responsible for assigning a current market value to your home. Appraisal fees generally range between $325.00 - $475.00

In addition to placing a value on the home, an appraiser must also make sure there are no major structural defects, such as a bad foundation, leaky roof, or termite damage. Federal regulations mandate that your home be structurally sound, and comply with all home safety codes, in order for the reverse mortgage to be made.

If the appraiser uncovers property defects, you must hire a contractor to complete the repairs. Once the repairs are completed, the same appraiser is paid for a second visit to make sure the repairs have been completed. The cost of the repairs may be financed in the loan and completed after the reverse mortgage is made. This is called a repair set-aside. Appraisers generally charge $100.00 dollars for the follow-up examination.

 

2. Other Closing Costs
Below is an list of estimated closing costs that are commonly charged to a reverse mortgage borrower. Please feel free to contact Jeanine at 847-540-5024 for a GFE (Good Faith Estimate) of related closing costs.

• Credit report fee. Verifies any federal tax liens, or other judgments, handed down against the borrower. Your credit score does not determine eligibility for a reverse mortgage but must nonetheless be secured so rule out any federal debts. Estimated Cost: $14.00 - $16.00
• Flood certification fee. Determines whether the property is located on a federally designated flood plane. Estimated Cost: $10.00
• Escrow, Settlement or Closing fee. Generally includes a title search and various other required closing services. Estimated Cost: $170.00 - $300.00
• Document preparation fee. Fee charged to prepare the final closing documents, including the mortgage note and other recordable items. Estimated Cost: $100.00
• Recording fee. Fee charged to record the mortgage lien with the County Recorder's Office. Estimated Cost: $75.00-$120.00
• Courier fee. Covers the cost of any overnight mailing of documents between the lender and the title company or loan investor. Estimated Cost: Generally under $20.00
• Title insurance. Insurance that protects the lender (lender's policy) or the buyer (owner's policy) against any loss arising from disputes over ownership of a property. Varies by size of the loan, though in general, the larger the loan amount, the higher the cost of the title insurance.
• Pest Inspection. Determines whether the home is infested with any wood-destroying organisms, such as termites. Only required if called for by the appraiser where visible infestation is observed. Estimated Cost: $100
• Roof Inspection or Foundation Inspection. Only needed if the appraiser has noted a deficiency in the property. Estimated Cost: $250 - $1000.00

 

3. Servicing Fee
Lenders or their agents provide servicing throughout the life of the HECM. Servicing includes sending you account statements, disbursing loan proceeds and making certain that you keep up with loan requirements such as paying taxes and insurance. HECM lenders may charge a monthly servicing fee of no more than $30 if the loan has an annually adjusting interest rate and $35 if the interest rate adjusts monthly. At loan origination, reverse mortgage lenders set aside the servicing fee and deduct the fee from your available funds. Each month the monthly servicing fee is added to your loan balance.

4. Interest Rate
Reverse Mortgage borrowers can choose an adjustable interest rate or a fixed rate. If you choose an adjustable interest rate, you may choose to have the interest rate adjust monthly or annually.

5. Mortgage Insurance Premium (MIP)
You will incur a cost for reverse mortgage insurance. You can finance the mortgage insurance premium (MIP) as part of your loan. You will be charged an upfront MIP at closing which will be 2% of the lesser of your home's value or the FHA HECM mortgage limit for your area. You will also be charged a monthly MIP that equals 0.5% of the mortgage balance.
The HECM insurance guarantees that you will receive expected loan advances and that you will not have to repay the loan for as long as you live in your home. The insurance also guarantees that, if you or your heirs sell your home to repay the loan, your total debt can never be greater than the value of your home.

There are no asset or income limitations in order for you to be eligible for a HECM. In addition, there is no limit on the value of homes qualifying for a HECM. The value of your home will be determined by an appraisal. However, the amount that you may borrow is derived from the lower of the appraised value or the FHA HECM mortgage limit for your area. For most areas, the HECM mortgage limit is $417,000. The $417,000 limit does not apply to parts of Hawaii, Guam and the Virgin islands, which may have higher limits. You are charged an upfront insurance premium of 2 percent of the maximum claim amount that may be borrowed plus a 0.5 percent annual premium.

6. Origination Fee

You will pay an origination fee to compensate the lender for processing your HECM loan. A lender charges a HECM origination fee up to $2,500 if your home is valued at less than $125,000. If your home is valued at more than $125,000 lenders charge 2% of the first $200,000 of your home's value plus 1% of the amount over $200,000. HECM origination fees are capped at $6,000.

 

Do I pay taxes on Reverse Mortgage loan proceeds?

Monies received from a Reverse Mortgage, according to the Internal Revenue Service, are considered a loan advance and are not a source of taxable income. It is recommended you consult with your personal tax advisor.

 

How is interest charged?

The interest on a Reverse Mortgage is adjustable and is tied to readily available market indexes. The initial rate is determined at loan closing and adjusts either monthly or annually. Interest charges do not affect the amount of your monthly check. You are only charged interest on your loan balance, which consists of the cash you receive and the financed closing costs. A fixed rate program is also available.

For details please call Jeanine toll free at 888-500-5024.

 

Can I deduct the interest charged on the loan principal?

When you permanently leave the property and no longer reside in the home, the accrued interest is then deductible once the loan balance and interest is repaid.

 

When does the Reverse Mortgage need to be paid?

Your Reverse Mortgage becomes due and payable when you permanently leave the home, whether you move, sell or pass away.

Repaying a HECM
A HECM loan must be repaid in full when you die or sell the home. The loan also becomes due and payable if:

• You do not pay property taxes or hazard insurance or violate other obligations.
• You permanently move to a new principal residence.
• You, or the last borrower, fail to live in the home for 12 months in a row. An example of this situation would be if you (or the last borrower) were to have a 12-month or longer stay in a nursing home.
• You allow the property to deteriorate and do not make necessary repairs.

What happens then?

Reverse Mortgages are typically repaid from the proceeds of the sale of the home, with any remaining equity staying with the homeowner or heirs.

 

What if my heirs wish to keep the home?

They may do so by refinancing the home with a conventional loan.

 

What if there is a remaining spouse in the home?

If a spouse passes away, the surviving spouse continues to receive the full benefits of the Reverse Mortgage, with no repayment until the last remaining spouse no longer permanently resides in the home.

 

What if I owe more than the house is worth?

Reverse Mortgages are non-recourse loans. The Borrower can never owe more than the value of the home, regardless of the loan balance.

 

Do I still own my home with a Reverse Mortgage or does the lender take the house?

You absolutely do own your home! You retain full ownership of your home. A Reverse mortgage is merely a lien against the property typical of standard mortgage lending. The property title remains in the name(s) of the Borrower(s).

 

Can a Reverse Mortgage be closed in a Living Trust?

Generally this is acceptable, however, the complete trust documents will need to be reviewed before a determination can be made and an attorney opinion letter obtained from your legal counsel.

 

What if I have a Land Trust? Can I still qualify for a Reverse Mortgage?

Yes. A copy of the trust will need to be provided along with all related documents and contact numbers.

 

Will a Reverse Mortgage affect my Social Security, Medicare or pension benefits?

No. Proceeds from a Reverse Mortgage do not affect these benefits.

 

What is a HECM Counseling Certificate?

This is a HUD required counseling session designed to assist you in determining if a Reverse Mortgage is right for you. The HUD approved counselors serve as a third party consultant to allow you the opportunity to ask questions outside of Lender interest. The Lender/Counselor relationship is designed to be neutral, thus allowing the homeowner the ability to obtain unbiased counsel. Lenders do not refer to specific counselors and counselors are prohibited from steering a homeowner to any specific Lender. This always puts the choice in your hands! The counseling session can be done either in person (face-to-face) or by phone. If you will be using a Power of Attorney in your transaction you will need the individual as well as a copy of the Power of Attorney available at the time of counseling. At the end of the session you will receive a Certificate of *HECM Counseling to provide your Lender. This signed, dated certificate is required prior to the Lender ordering any services (appraisal, title commitment, etc.). The typical cost for this session is $125.00 and can sometimes be included in your financed costs. You will need to check with the individual counselor/agency to determine if the counseling session can be financed or if payment is required at the time of the session. We will be happy to supply you with a list of counselors in your area. Simply call us at 888-500-5024 for this list. *HECM=Home Equity Conversion Mortgage.

 

Are their any homes that do not qualify for a Reverse Mortgage?

Yes. Mobile and manufactured homes, not attached to a permanent foundation, rental properties of more than four units, homes on leased land, vacation homes or any other secondary residences do not qualify.

Qualifying Homes For Standard Reverse Mortgages and Reverse Mortgage for Purchase:

• Single family home or 1-4 unit home with one unit occupied by the borrower
• HUD-approved condominium
• Manufactured home that meets FHA requirements
• Link to Manufactured Home requirements: http://www.hud.gov/offices/hsg/sfh/mhs/faq.cfm

 

 

What items will I need to apply?

The following is a list of items and/or documents you will need to have available at the time of your application:

• A Smile. We also bring a pocket full of smiles to share!

• Original, signed and dated HECM Counseling Certificate as discussed above.

• Photocopy of your Drivers License and Social Security Card. If available, a copy of your Birth Certificate.

• Copy of your most recent Property Tax statement.

• Copy of your Homeowners Insurance Declaration (detail) page.

• ORIGINAL death certificate of spouse if a widow(er). This is needed if the deceased spouse has not been removed from title.

• Name, address, account number and statement from any current mortgage debt or any other liens on the property.

• If the property is held in a Living Trust, a complete copy of the trust, including all pages and amendments is required, as well as an Attorney Opinion letter. (We will provide the letter to you)

• If in a Land Trust a complete copy of the trust and the contact information for the Trust holder.

• If Borrower has a Power of Attorney signing, a complete copy of the *Illinois Statutory Short Form Power of Attorney documentation is required, and the ORIGINAL will be required at closing so that it can be recorded. *Check with your legal counsel regarding the appropriate Illinois durable power of attorney form.

 

Why should I choose Seniors Reverse Mortgage?

Seniors Reverse Mortgage is committed to going the extra mile for you, ensuring your loan, its processing, underwriting and closing go smoothly. Seniors Reverse represents many of today's top, established Lenders and will work to find the program that is personally right for you. With a focus on detail, excellence and friendly service, you can sit back, relax and let us go to work for you.

 

Why should I choose Jeanine M Weintz as my Reverse Mortgage Specialist?

Having been in the reverse mortgage industry for nearly a decade, you can rely on the many years of experience and integrity Jeanine provides. Jeanine M Weintz's commitment to customer care and personal attention to each individuals specific circumstances and situation have earned her a place of recognition as a top Loan Originator and senior advocate. A people person who really cares about her clients, you can rest assured your experience with Jeanine will be a pleasant and caring one. Committed to excellence, care and serving you for years to come. Jeanine provides reverse mortgages.... with that personal touch!

 

When I call 888-500-5024 will I be put on hold or routed out of the country?

I know what it is like to be instructed to press a numerical choice, listen to the following 112 options as they may have recently changed, transfer here, be put on hold, listen to overly loud, poor choice music, only to be disconnected or routed to the wrong person. I, Jeanine M Weintz, am committed to answering all my calls personally. I do not pass you along to someone else or transfer your call out of state. Your call will come directly to my personal desk. And because it is so important to me that I speak with each caller directly, insuring they receive the time and attention deserved, you may, at times, be placed in voicemail, which I know many people dislike. I am willing to take the risk that you may hang up and not leave a message, however, I kindly encourage you to let me know you called and as soon as I check my secure voicemail, I will be happy to contact you and devote all the time necessary to insure your questions are answered. While it is true you may get voicemail to start, rest assured you will also get me to finish. I thank you in advance for your kind patience and I look forward to assisting you.

 

This sounds great! What is the next step?

You may contact Jeanine M. Weintz Toll Free at 888-500-5024. Jeanine will be happy to provide the tools and educational materials you may need when making an informed decision. Thank you for visiting us today and we look forward to serving you.

 

COURTESY GLOSSORY OF TERMS

203(b): FHA's single family program which provides mortgage insurance to lenders to protect against the borrower defaulting; 203(b) is used to finance the purchase of new or existing one to four family housing; 203(b) insured loans are known for requiring a low down payment, flexible qualifying guidelines, limited fees, and a limit on maximum loan amount.

A

ARM: Adjustable Rate Mortgage; a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the change in monthly payment amount, however, is usually subject to a cap.

Abstract of Title: documents recording the ownership of property throughout time.

Adjustable-Rate Mortgage (ARM): a mortgage loan that does not have a fixed interest rate. During the life of the loan the interest rate will change based on the index rate. Also referred to as adjustable mortgage loans (AMLs) or variable-rate mortgages (VRMs).

Adjustment Index: the published market index used to calculate the interest rate of an ARM at the time of origination or adjustment.

Affidavit: a signed, sworn statement made by the buyer or seller regarding the truth of information provided.

Amortization: a payment plan that enables you to reduce your debt gradually through monthly payments. The payments may be principal and interest, or interest-only. The monthly amount is based on the schedule for the entire term or length of the loan.

Annual Percentage Rate (APR): a measure of the cost of credit, expressed as a yearly rate. It includes interest as well as other charges. Because all lenders, by federal law, follow the same rules to ensure the accuracy of the annual percentage rate, it provides consumers with a good basis for comparing the cost of loans, including mortgage plans. APR is a higher rate than the simple interest of the mortgage.

Application: the first step in the official loan approval process; this form is used to record important information about the potential borrower necessary to the underwriting process.

To apply for a reverse mortgage please call Jeanine at (847) 540-5024 (Illinois) or Toll Free at (888) 500-5024

Appraisal: a document from a professional that gives an estimate of a property's fair market value based on the sales of comparable homes in the area and the features of a property; an appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property.

Appraisal Fee: fee charged by an appraiser to estimate the market value of a property. Can range from $325.00 to $500.00

Appraised Value: an estimation of the current market value of a property.

Appraiser: a qualified individual who uses his or her experience and knowledge to prepare the appraisal estimate.

Appreciation: an increase in property value.

Assessed Value: the value that a public official has placed on any asset (used to determine taxes).

Assessments: the method of placing value on an asset for taxation purposes.

Assessor: a government official who is responsible for determining the value of a property for the purpose of taxation.

Assets: any item with measurable value.

B

Bankruptcy: a federal law whereby a person's assets are turned over to a trustee and used to pay off outstanding debts; this usually occurs when someone owes more than they have the ability to repay.

Borrower: a person who has been approved to receive a loan and is then obligated to repay it and any additional fees according to the loan terms.

Building Code: based on agreed upon safety standards within a specific area, a building code is a regulation that determines the design, construction, and materials used in building.

C

Cap: a limit, such as one placed on an adjustable rate mortgage, on how much a monthly payment or interest rate can increase or decrease, either at each adjustment period or during the life of the mortgage. Payment caps do not limit the amount of interest the lender is earning, so they may cause negative amortization.

Capital Gain: the profit received based on the difference of the original purchase price and the total sale price.

Capital Improvements: property improvements that either will enhance the property value or will increase the useful life of the property.

Capital or Cash Reserves: an individual's savings, investments, or assets.

Certificate of Title: a document provided by a qualified source, such as a title company, that shows the property legally belongs to the current owner; before the title is transferred at closing, it should be clear and free of all liens or other claims.

Chapter 7 Bankruptcy: a bankruptcy that requires assets be liquidated in exchange for the cancellation of debt.

Chapter 13 Bankruptcy: this type of bankruptcy sets a payment plan between the borrower and the creditor monitored by the court. The homeowner can keep the property, but must make payments according to the court's terms within a 3 to 5 year period.

Clear Title: a property title that has no defects. Properties with clear titles are marketable for sale.

Closing: the final step in property purchase where the title is transferred from the seller to the buyer. Closing occurs at a meeting between the buyer, seller, settlement agent, and other agents. At the closing the seller receives payment for the property. Also known as settlement.

Closing Costs: fees for final property transfer not included in the price of the property. Typical closing costs include charges for the mortgage loan such as origination fees, discount points, appraisal fee, survey, title insurance, legal fees, real estate professional fees, prepayment of taxes and insurance, and real estate transfer taxes. A common estimate of a Buyer's closing costs is 2 to 4 percent of the purchase price of the home. A common estimate for Seller's closing costs is 3 to 9 percent.

Co-Borrower: an additional person that is responsible for loan repayment and is listed on the title.
Collateral: security in the form of money or property pledged for the payment of a loan. For example, on a home loan, the home is the collateral and can be taken away from the borrower if mortgage payments are not made.

Comparative Market Analysis (COMPS): a property evaluation that determines property value by comparing similar properties sold within the last year.

Condominium: a form of ownership in which individuals purchase and own a unit of housing in a multi-unit complex. The owner also shares financial responsibility for common areas. Reverse Mortgages can be done on condominium property, however, they must be checked against the FHA Approved Condo List.

Credit: an agreement that a person will borrow money and repay it to the lender over time.

Credit Bureau: an agency that provides financial information and payment history to lenders about potential borrowers. Also known as a National Credit Repository.

Credit Counseling: education on how to improve bad credit and how to avoid having more debt than can be repaid. Reverse Mortgages require mandatory HECM counseling with a HUD approved counselor.

Credit Report: a report generated by the credit bureau that contains the borrower's credit history for the past seven years. Lenders use this information to determine if a loan will be granted. Reverse Mortgages do NOT use your credit score in determining loan approval.

Credit Score: a score calculated by using a person's credit report to determine the likelihood of a loan being repaid on time. Scores range from about 360 - 840: a lower score meaning a person is a higher risk, while a higher score means that there is less risk. Reverse Mortgages do NOT use your credit score in determining loan approval.

Creditor: the lending institution providing a loan or credit.

D

Debtor: The person or entity that borrows money. The term debtor may be used interchangeably with the term borrower.

Debt-to-Income Ratio: a comparison or ratio of gross income to housing and non-housing expenses; With the FHA, the-monthly mortgage payment should be no more than 29% of monthly gross income (before taxes) and the mortgage payment combined with non-housing debts should not exceed 41% of income. Reverse Mortgages do NOT use the Debt-to-income ratio in determining loan approval.

Deed: a document that legally transfers ownership of property from one person to another. The deed is recorded on public record with the property description and the owner's signature. Also known as the title.

Depreciation: a decrease in the value or price of a property due to changes in market conditions, wear and tear on the property, or other factors.

Document Recording: after closing on a loan, certain documents are filed and made public record. Discharges for the prior mortgage holder are filed first. Then the deed is filed with the new owner's and mortgage company's names.

 

E

Easements: the legal rights that give someone other than the owner access to use property for a specific purpose. Easements may affect property values and are sometimes a part of the deed.

Encroachments: a structure that extends over the legal property line on to another individual's property. The property surveyor will note any encroachment on the lot survey done before property transfer. The person who owns the structure will be asked to remove it to prevent future problems.

Encumbrance: anything that affects title to a property, such as loans, leases, easements, or restrictions.

Equal Credit Opportunity Act (ECOA): a federal law requiring lenders to make credit available equally without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Equity: an owner's financial interest in a property; calculated by subtracting the amount still owed on the mortgage loon(s)from the fair market value of the property.

Escrow: funds held in an account to be used by the lender to pay for home insurance and property taxes. Reverse Mortgages typically do NOT escrow property taxes and insurance. These items are paid directly by the homeowner and are the responsibility of the borrower.

Escrow Account: a separate account into which the lender puts a portion of each monthly mortgage payment; an escrow account provides the funds needed for such expenses as property taxes, homeowners insurance, mortgage insurance, etc. Again, Reverse Mortgages typically do NOT escrow property taxes and insurance. These items are paid directly by the homeowner and are the responsibility of the borrower.

Estate: the ownership interest of a person in real property. The sum total of all property, real and personal, owned by a person.

F

FICO Score: FICO is an abbreviation for Fair Isaac Corporation and refers to a person's credit score based on credit history. Lenders and credit card companies use the number to decide if the person is likely to pay his or her bills. A credit score is evaluated using information from the three major credit bureaus and is usually between 300 and 850.  Reverse Mortgages do NOT rely on a FICO score when determining loan approval.

FSBO (For Sale by Owner): a home that is offered for sale by the owner without the benefit of a real estate professional.

Fair Credit Reporting Act: federal act to ensure that credit bureaus are fair and accurate protecting the individual's privacy rights enacted in 1971 and revised in October 1997.

Fair Housing Act: a law that prohibits discrimination in all facets of the home buying process on the basis of race, color, national origin, religion, sex, familial status, or disability.

Fair Market Value: : the hypothetical price that a willing buyer and seller will agree upon when they are acting freely, carefully, and with complete knowledge of the situation.

Fannie Mae: Federal National Mortgage Association (FNMA); a federally-chartered enterprise owned by private stockholders that purchases residential mortgages and converts them into securities for sale to investors; by purchasing mortgages, Fannie Mae supplies funds that lenders may loan to potential homebuyers. Also known as a Government Sponsored Enterprise (GSE).

FHA: Federal Housing Administration; established in 1934 to advance homeownership opportunities for all Americans; assists homebuyers by providing mortgage insurance to lenders to cover most losses that may occur when a borrower defaults; this encourages lenders to make loans to borrowers who might not qualify for conventional mortgages.

First Mortgage: the mortgage with first priority if the loan is not paid.

Fixed Expenses: payments that do not vary from month to month.

Fixed-Rate Mortgage: a mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change.

Flood Insurance: insurance that protects homeowners against losses from a flood; if a home is located in a flood plain, the lender will require flood insurance before approving a loan.

Forbearance: a lender may decide not to take legal action when a borrower is late in making a payment. Usually this occurs when a borrower sets up a plan that both sides agree will bring overdue mortgage payments up to date.

Foreclosure: a legal process in which mortgaged property is sold to pay the loan of the defaulting borrower. Foreclosure laws are based on the statutes of each state.

Freddie Mac: Federal Home Loan Mortgage Corporation (FHLM); a federally chartered corporation that purchases residential mortgages, securitizes them, and sells them to investors; this provides lenders with funds for new homebuyers. Also known as a Government Sponsored Enterprise (GSE).

G

Ginnie Mae: Government National Mortgage Association (GNMA); a government-owned corporation overseen by the U.S. Department of Housing and Urban Development, Ginnie Mae pools FHA-insured and VA-guaranteed loans to back securities for private investment; as With Fannie Mae and Freddie Mac, the investment income provides funding that may then be lent to eligible borrowers by lenders.

Good Faith Estimate: an estimate of all closing fees including pre-paid and escrow items as well as lender charges; must be given to the borrower within three days after submission of a loan application.

Grantee: an individual to whom an interest in real property is conveyed.

Grantor: an individual conveying an interest in real property.

H

HECM (Reverse Mortgage): the reverse mortgage is used by senior homeowners age 62 and older to convert the equity in their home into monthly streams of income and/or a line of credit to be repaid when they no longer occupy the home. A lending institution such as a mortgage lender, bank, credit union or savings and loan association funds the FHA insured loan, commonly known as HECM. HECM is an acronym for Home Equity Conversion Mortgage.

Hazard Insurance: protection against a specific loss, such as fire, wind etc., over a period of time that is secured by the payment of a regularly scheduled premium.

Home Equity Line of Credit: a mortgage loan, usually in second mortgage, allowing a borrower to obtain cash against the equity of a home, up to a predetermined amount.

Home Equity Loan: a loan backed by the value of a home (real estate). If the borrower defaults or does not pay the loan, the lender has some rights to the property. The borrower can usually claim a home equity loan as a tax deduction.

Home Inspection: an examination of the structure and mechanical systems to determine a home's quality, soundness and safety; makes the potential homebuyer aware of any repairs that may be needed. The homebuyer generally pays inspection fees.

Homeowner's Insurance: an insurance policy, also called hazard insurance, that combines protection against damage to a dwelling and its contents including fire, storms or other damages with protection against claims of negligence or inappropriate action that result in someone's injury or property damage. Most lenders require homeowners insurance and may escrow the cost. Flood insurance is generally not included in standard policies and must be purchased separately if a home proves to be located in an established flood zone.

Housing Counseling Agency: provides counseling and assistance to individuals on a variety of issues, including loan default, fair housing, and home buying. Reverse Mortgage applicants are required to speak to a HUD approved counseling agency prior to securing a reverse mortgage.

HUD: the U.S. Department of Housing and Urban Development; established in 1965, HUD works to create a decent home and suitable living environment for all Americans; it does this by addressing housing needs, improving and developing American communities, and enforcing fair housing laws.

HUD1 Statement: also known as the "settlement sheet," or "closing statement" it itemizes all closing costs; must be given to the borrower at or before closing. Items that appear on the statement include real estate commissions, loan fees, points, and escrow amounts.

I

Index: the measure of interest rate changes that the lender uses to decide how much the interest rate of an ARM will change over time. No one can be sure when an index rate will go up or down. If a lender bases interest rate adjustments on the average value of an index over time, your interest rate would not be as volatile. You should ask your lender how the index for any ARM you are considering has changed in recent years, and where it is reported.

Inflation: the number of dollars in circulation exceeds the amount of goods and services available for purchase; inflation results in a decrease in the dollar's value.

Interest: a fee charged for the use of borrowing money.

Interest Rate: the amount of interest charged on a monthly loan payment, expressed as a percentage.

Insurance: protection against a specific loss, such as fire, wind etc., over a period of time that is secured by the payment of a regularly scheduled premium.

J

Joint Tenancy (with Rights of Survivorship): two or more owners share equal ownership and rights to the property. If a joint owner dies, his or her share of the property passes to the other owners, without probate. In joint tenancy, ownership of the property cannot be willed to someone who is not a joint owner.

Judgment: a legal decision; when requiring debt repayment, a judgment may include a property lien that secures the creditor's claim by providing a collateral source.

Jumbo Loan: or non-conforming loan, is a loan that exceeds Fannie Mae's and Freddie Mac's loan limits. Freddie Mac and Fannie Mae loans are referred to as conforming loans.

 

L

Lender: A term referring to an person or company that makes loans for real estate purchases. Sometimes referred to as a loan officer or lender.

Liabilities: a person's financial obligations such as long-term / short-term debt, and other financial obligations to be paid.

LIBOR Rate: LIBOR stands for London Interbank Offered Rate. It's the rate of interest at which banks offer to lend money to one another in the wholesale money markets in London. It is a standard financial index used in U.S. capital markets and can be found in the Wall Street Journal. In general, its changes have been smaller than changes in the prime rate. It's an index that is used to set the cost of various variable-rate loans, including credit cards and adjustable-rate mortgages.

Lien: a legal claim against property that must be satisfied when the property is sold. A claim of money against a property, wherein the value of the property is used as security in repayment of a debt. Examples include a mechanic's lien, which might be for the unpaid cost of building supplies, or a tax lien for unpaid property taxes. A lien is a defect on the title and needs to be settled before transfer of ownership. A lien release is a written report of the settlement of a lien and is recorded in the public record as evidence of payment.

Lien Waiver: A document that releases a consumer (homeowner) from any further obligation for payment of a debt once it has been paid in full. Lien waivers typically are used by homeowners who hire a contractor to provide work and materials to prevent any subcontractors or suppliers of materials from filing a lien against the homeowner for nonpayment.

Life Cap: a limit on the range interest rates can increase or decrease over the life of an adjustable-rate mortgage (ARM).

Line of Credit: an agreement by a financial institution such as a bank to extend credit up to a certain amount for a certain time to a specified borrower.

Loan: money borrowed that is usually repaid with interest.

Loan Officer: a representative of a lending or mortgage company who is responsible for soliciting homebuyers, qualifying and processing of loans. They may also be called lender, loan representative, account executive or loan rep.

Loan Origination Fee: a charge by the lender to cover the administrative costs of making the mortgage. This charge is paid at the closing and for a reverse mortgage calculate as follows: A lender charges a HECM origination fee up to $2,500 if your home is valued at less than $125,000. If your home is valued at more than $125,000 lenders charge 2% of the first $200,000 of your home's value plus 1% of the amount over $200,000. HECM origination fees are capped at $6,000.

Loan Servicer: the company that collects monthly mortgage payments and disperses property taxes and insurance payments. Loan servicers also monitor nonperforming loans, contact delinquent borrowers, and notify insurers and investors of potential problems. Loan servicers may be the lender or a specialized company that just handles loan servicing under contract with the lender or the investor who owns the loan.

Loan to Value (LTV) Ratio: a percentage calculated by dividing the amount borrowed by the price or appraised value of the home to be purchased; the higher the LTV, the less cash a borrower is required to pay as down payment.

Lock-In: since interest rates can change frequently, many lenders offer an interest rate lock-in that guarantees a specific interest rate if the loan is closed within a specific time.

Lock-in Period: the length of time that the lender has guaranteed a specific interest rate to a borrower.

 

M

Margin: the number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.

Market Value: the amount a willing buyer would pay a willing seller for a home. An appraised value is an estimate of the current fair market value.

Median Price: the price of the house that falls in the middle of the total number of homes for sale in that area.

Merged Credit Report: raw data pulled from two or more of the major credit-reporting firms.

Mortgage: a lien on the property that secures the Promise to repay a loan. A security agreement between the lender and the buyer in which the property is collateral for the loan. The mortgage gives the lender the right to collect payment on the loan and to foreclose if the loan obligations are not met. Reverse Mortgages however, are not due, nor payable until the homeowner permanently vacates the home as their primary residence. As long as property taxes and homeowners insurance are paid by the borrower and the home kept in good repair, no payments are required and there is no threat of foreclosure.

Mortgage-Backed Security (MBS): a Fannie Mae security that represents an undivided interest in a group of mortgages. Principal and interest payments from the individual mortgage loans are grouped and paid out to the MBS holders.

Mortgage Banker: a company that originates loans and resells them to secondary mortgage lenders like Fannie Mae or Freddie Mac.

Mortgage Broker: a firm that originates and processes loans for a number of lenders. Seniors Reverse Mortgage does NOT charge any additional fees to place your loan with varying Lenders and works to find the best program for you as a service to each homeowner.

Mortgage Insurance: a policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan; mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home's purchase price. Insurance purchased by the buyer to protect the lender in the event of default. Typically purchased for loans with less than 20 percent down payment. The cost of mortgage insurance is usually added to the monthly payment. Mortgage insurance is maintained on conventional loans until the outstanding amount of the loan is less than 80 percent of the value of the house or for a set period of time (7 years is common). Mortgage insurance also is available through a government agency, such as the Federal Housing Administration (FHA) or through companies (Private Mortgage Insurance or PMI). NOTE: This is NOT to be confused with MIP (see below). Reverse Mortgages collect MIP as noted below and NOT the Mortgage Insurance in the above description.

Mortgage Insurance Premium (MIP): a monthly payment -usually part of the mortgage payment - paid by a borrower for mortgage insurance. In a reverse mortgage you will be charged an upfront MIP at closing which will be 2% of the lesser of your home's value or the FHA HECM mortgage limit for your area. You will also be charged a monthly MIP that equals 0.5% of the mortgage balance.
The HECM insurance guarantees that you will receive expected loan advances and that you will not have to repay the loan for as long as you live in your home. The insurance also guarantees that, if you or your heirs sell your home to repay the loan, your total debt can never be greater than the value of your home.

Mortgage Note: a legal document obligating a borrower to repay a loan at a stated interest rate during a specified period; the agreement is secured by a mortgage that is recorded in the public records along with the deed.

Mortgagee: the lender in a mortgage agreement. Mortgagor - The borrower in a mortgage agreement.

Mortgagor: the borrower in a mortgage agreement

Multifamily Housing: a building with more than four residential rental units.

Multiple Listing Service (MLS): within the Metro Columbus area, Realtors submit listings and agree to attempt to sell all properties in the MLS. The MLS is a service of the local Columbus Board of Realtors®. The local MLS has a protocol for updating listings and sharing commissions. The MLS offers the advantage of more timely information, availability, and access to houses and other types of property on the market.

N

National Credit Repositories: currently, there are three companies that maintain national credit - reporting databases. These are Equifax, Experian, and Trans Union, referred to as Credit Bureaus.

Negative Amortization: amortization means that monthly payments are large enough to pay the interest and reduce the principal on your mortgage. Negative amortization occurs when the monthly payments do not cover all of the interest cost. The interest cost that isn't covered is added to the unpaid principal balance. This means that even after making many payments, you could owe more than you did at the beginning of the loan. Negative amortization can occur when an ARM has a payment cap that results in monthly payments not high enough to cover the interest due.

Net Income: Your take-home pay, the amount of money that you receive in your paycheck after taxes and deductions.

 Note: a legal document obligating a borrower to repay a mortgage loan at a stated interest rate over a specified period of time.

Note Rate: the interest rate stated on a mortgage note.

 Notary Public: a person who serves as a public official and certifies the authenticity of required signatures on a document by signing and stamping the document.

 

O

 

Original Principal Balance: the total principal owed on a mortgage prior to any payments being made.

Origination: the process of preparing, submitting, and evaluating a loan application; generally includes a credit check, verification of employment, and a property appraisal.

Origination Fee: the charge for originating a loan; is usually calculated in the form of points and paid at closing. One point equals one percent of the loan amount. On a conventional loan, the loan origination fee is the number of points a borrower pays.

  

P

 

PMI: Private Mortgage Insurance; privately-owned companies that offer standard and special affordable mortgage insurance programs for qualified borrowers with down payments of less than 20% of a purchase price. This is NOT the same as reverse mortgage MIP.

 Personal Property: any property that is not real property or attached to real property. For example furniture is not attached however a new light fixture would be considered attached and part of the real property.

Planned Unit Development (PUD): a development that is planned, and constructed as one entity. Generally, there are common features in the homes or lots governed by covenants attached to the deed. Most planned developments have common land and facilities owned and managed by the owner's or neighborhood association. Homeowners usually are required to participate in the association via a payment of annual dues.

Points: a point is equal to one percent of the principal amount of your mortgage. For example, if you get a mortgage for $95,000, one point means you pay $950 to the lender. Lenders frequently charge points in both fixed-rate and adjustable-rate mortgages in order to increase the yield on the mortgage and to cover loan closing costs. These points usually are collected at closing and may be paid by the borrower or the home seller, or may be split between them.

Power of Attorney: a legal document that authorizes another person to act on your behalf. A power of attorney can grant complete authority or can be limited to certain acts or certain periods of time or both. In Illinois an Illinois Statutory Short Form is required. Please consult your legal counsel.

Pre-Approval: a lender commits to lend to a potential borrower a fixed loan amount based on a completed loan application, credit reports, debt, savings and has been reviewed by an underwriter. The commitment remains as long as the borrower still meets the qualification requirements at the time of purchase. This does not guaranty a loan until the property has passed inspections underwriting guidelines.

Predatory Lending: abusive lending practices that include a mortgage loan to someone who does not have the ability to repay. It also pertains to repeated refinancing of a loan charging high interest and fees each time.

Prepayment: payment of the mortgage loan before the scheduled due date; may be Subject to a prepayment penalty. Reverse Mortgages do NOT charge prepayment penalty.

Prepayment Penalty: a provision in some loans that charge a fee to a borrower who pays off a loan before it is due. Reverse Mortgages do NOT charge prepayment penalty.

Premium: an amount paid on a regular schedule by a policyholder that maintains insurance coverage.

Prime Rate: the interest rate that banks charge to preferred customers. Changes in the prime rate are publicized in the business media. Prime rate can be used as the basis for adjustable rate mortgages (ARMs) or home equity lines of credit. The prime rate also affects the current interest rates being offered at a particular point in time on fixed mortgages. Changes in the prime rate do not affect the interest on a fixed mortgage.

Principal: the amount of money borrowed to buy a house or the amount of the loan that has not been paid back to the lender. This does not include the interest paid to borrow that money. The principal balance is the amount owed on a loan at any given time. It is the original loan amount minus the total repayments of principal made.

Principal, Interest, Taxes, and Insurance (PITI): the four elements of a monthly mortgage payment; payments of principal and interest go directly towards repaying the loan while the portion that covers taxes and insurance (homeowner's and mortgage, if applicable) goes into an escrow account to cover the fees when they are due.

Property Tax: a tax charged by local government and used to fund municipal services such as schools, police, or street maintenance. The amount of property tax is determined locally by a formula, usually based on a percent per $1,000 of assessed value of the property.

Public Record Information: Court records of events that are a matter of public interest such as credit, bankruptcy, foreclosure and tax liens. The presence of public record information on a credit report is regarded negatively by creditors.

Q

Quitclaim Deed: a deed transferring ownership of a property but does not make any guarantee of clear title.

R

RESPA: Real Estate Settlement Procedures Act; a law protecting consumers from abuses during the residential real estate purchase and loan process by requiring lenders to disclose all settlement costs, practices, and relationships

 Rate Cap: a limit on an ARM on how much the interest rate or mortgage payment may change. Rate caps limit how much the interest rates can rise or fall on the adjustment dates and over the life of the loan.

Rate Lock: a commitment by a lender to a borrower guaranteeing a specific interest rate over a period of time at a set cost.

 Real Estate Settlement Procedures Act (RESPA): a law protecting consumers from abuses during the residential real estate purchase and loan process by requiring lenders to disclose all settlement costs, practices, and relationships

Real Property: land, including all the natural resources and permanent buildings on it.

Recorder: the public official who keeps records of transactions concerning real property. Sometimes known as a "Registrar of Deeds" or "County Clerk."

Recording: the recording in a registrar's office of an executed legal document. These include deeds, mortgages, satisfaction of a mortgage, or an extension of a mortgage making it a part of the public record.

Recording Fees: charges for recording a deed with the appropriate government agency.

Reverse Mortgage (HECM): the reverse mortgage is used by senior homeowners age 62 and older to convert the equity in their home into monthly streams of income and/or a line of credit to be repaid when they no longer occupy the home. A lending institution such as a mortgage lender, bank, credit union or savings and loan association funds the FHA insured loan, commonly known as HECM.

 

S

Second Mortgage: an additional mortgage on property. In case of a default the first mortgage must be paid before the second mortgage. Second loans are more risky for the lender and usually carry a higher interest rate.

Secondary Mortgage Market: the buying and selling of mortgage loans. Investors purchase residential mortgages originated by lenders, which in turn provides the lenders with capital for additional lending.

Secured Loan: a loan backed by collateral such as property.

Security: the property that will be pledged as collateral for a loan.

 Servicer: a business that collects mortgage payments from borrowers and manages the borrower's escrow accounts.

Servicing: the collection of mortgage payments from borrowers and related responsibilities of a loan servicer.

Settlement: another name for closing.

Settlement Statement: a document required by the Real Estate Settlement Procedures Act (RESPA). It is an itemized statement of services and charges relating to the closing of a property transfer. The buyer has the right to examine the settlement statement 1 day before the closing. This is called the HUD 1 Settlement Statement.

Sub-Prime Loan: "B" Loan or "B" paper with FICO scores from 620 - 659. "C" Loan or "C" Paper with FICO scores typically from 580 to 619. An industry term to used to describe loans with less stringent lending and underwriting terms and conditions. Due to the higher risk, sub-prime loans charge higher interest rates and fees.

Subordinate: to place in a rank of lesser importance or to make one claim secondary to another.

Survey: a property diagram that indicates legal boundaries, easements, encroachments, rights of way, improvement locations, etc. Surveys are conducted by licensed surveyors and are normally required by the lender in order to confirm that the property boundaries and features such as buildings, and easements are correctly described in the legal description of the property.

 

T

Third Party Origination: a process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market.

Terms: The period of time and the interest rate agreed upon by the lender and the borrower to repay a loan.

Title: a legal document establishing the right of ownership and is recorded to make it part of the public record. Also known as a Deed.

Title 1: an FHA-insured loan that allows a borrower to make non-luxury improvements (like renovations or repairs) to their home; Title I loans less than $7,500 don't require a property lien.

Title Company: a company that specializes in examining and insuring titles to real estate.

Title Defect: an outstanding claim on a property that limits the ability to sell the property. Also referred to as a cloud on the title.

Title Insurance: insurance that protects the lender against any claims that arise from arguments about ownership of the property; also available for homebuyers. An insurance policy guaranteeing the accuracy of a title search protecting against errors. Most lenders require the buyer to purchase title insurance protecting the lender against loss in the event of a title defect. This charge is included in the closing costs. A policy that protects the buyer from title defects is known as an owner's policy and requires an additional charge.

Title Search: a check of public records to be sure that the seller is the recognized owner of the real estate and that there are no unsettled liens or other claims against the property.

 Treasury Index: can be used as the basis for adjustable rate mortgages (ARMs) It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities.

Truth-in-Lending: a federal law obligating a lender to give full written disclosure of all fees, terms, and conditions associated with the loan initial period and then adjusts to another rate that lasts for the term of the loan.

Trustee: a person who holds or controls property for the benefit of another.

U

Underwriting: the process of analyzing a loan application to determine the amount of risk involved in making the loan; it includes a review of the potential borrower's credit history and a judgment of the property value.

Up Front Charges: the fees charged to homeowners by the lender at the time of closing a mortgage loan. This includes points, broker's fees, insurance, and other charges.

V

 

Vested: a point in time when you may withdraw funds from an investment account, such as a retirement account, without penalty.

W

Warranty Deed: a legal document that includes the guarantee the seller is the true owner of the property, has the right to sell the property and there are no claims against the property.

X

Xtra Special: How we treat all borrowers and their families.

Y

Y-Choose Seniors Reverse Mortgage: Seniors Reverse Mortgage is committed to going the extra mile for you, ensuring your loan, its processing, underwriting and closing go smoothly. Seniors Reverse represents many of today's top, established Lenders and will work to find the program that is personally right for you. With a focus on detail, excellence and friendly service, you can sit back, relax and let us go to work for you.

 

Z

Zillow.com: Popular web site accessed by consumers to get an idea of property value. While this can serve as a general range of property value, oftentimes values do not reflect the current market therefore should not be used as an accurate assessment of property. The only way to have a solid property assessment is through an approved appraiser.

Zoning: local laws established to control the uses of land within a particular area. Zoning laws are used to separate residential land from areas of non-residential use, such as industry or businesses. Zoning ordinances include many provisions governing such things as type of structure, setbacks, lot size, and uses of a building.