10 How to Qualify for a Reverse Mortgage

It’s easy to determine if you qualify for a reverse mortgage. The basic requirements are:

1. You must be at least 62 years or older.
2. You must reside in the home as your primary residence.
3. You must have sufficient equity in your home.

Additional requirements:

Primary lien: A reverse mortgage must be the primary lien on the home. Any existing mortgage must be paid off using the proceeds from the reverse mortgage. (Reverse mortgage proceeds can be used,) 

Taxes and Insurance: You must remain current on your real estate taxes, homeowners insurance, and other mandatory obligations, including condominium fees, or you are susceptible to default.

Property Condition: You are responsible for completing mandatory repairs and maintaining the condition of the property.

Conveyance of the mortgaged property by will or operation of law to the estate or heir after mortgagor's death: When a reverse mortgage becomes due and payable as a result of the borrower's death and the property is conveyed by will or operation of law to the estate or heirs (including a surviving spouse who is not on title and therefore not obligated on the HECM note) that party (or parties if multiple heirs) may satisfy the HECM debt by paying the lesser of the mortgage balance or 95% of the current appraised value of the property.

Advantages of your new Reverse Mortgage:

• You will not be required to make a mortgage payment to your reverse mortgage in order to qualify to live in your home as long as it is your primary residence. You will still be responsible for property taxes, insurance and repairs to the home.
• People with or without a current mortgage can qualify.
• Reverse mortgages are insured by the Federal Housing Administration (FHA) and are called Home Equity Conversion Mortgages (HECMs).
• Income and credit are not factors to qualify for a reverse mortgage – currently only your age and the value of your home will determine your proceeds.

 See more about qualifying

There are Three Reverse Mortgage Options to Choose From:

1.     1 HECM Adjustable

The Adjustable Rate Mortgage (ARM) is tied to the LIBOR index and is updated monthly.  A “margin” is added to the LIBOR index and that creates the annual interest rate that is charged on the outstanding balance.  The ARM option offers clients the most flexibility.

• The senior can receive monthly income,
• The senior can take a disbursement at the time of closing,
• The senior can have the funds available in the form of a Line of Credit to use on an as needed basis, or
• The senior can have a combination of any of the above!

Additionally, should the client’s needs change in the future, the set-up of the loan can be changed at any time for a nominal fee (currently the charge is about $30 to make a change).

Finally, you should know that any unused portion of funds (the money that is available but hasn’t been taken yet) actually appreciates at 1.25% HIGHER than the rate that is being charged on the used portion.  Under certain circumstances, this can be used as an excellent estate planning tool and could leave a bigger estate to your heirs than just the value of the home.  Essentially, over time it is likely that the Line of Credit is worth more than the value of the home itself!

2.      HECM Fixed

The Fixed Rate program is not as flexible at the ARM, but it does offer a rate that will never change.  With the Fixed program, the only option for disbursement of funds is Lump Sum.  The Fixed Rate is often used when the purpose of the money is already known.  As an example: If the Principle Limit (or Loan Size) is $100,000  and the senior has a $85,000 mortgage lien that needs to be paid off, then after the original mortgage is paid, the senior would have $15,000 left over to save or spend however they like.

3.      HECM Hybrid

This is a relatively new option that combines the Fixed and the ARM.

Summary

Each program can then be modified further to your specific needs.  Your New Mexico Reverse Mortgage expert will show you how to qualify for a reverse mortgage, answer your questions and help you select a loan program that best suits your needs.

What is a CRMP?

A CRMP is a loan officer who has attained a Certified Reverse Mortgage Professional (CRMP)designation.  Dealing with a lender who does not have this certification is a risky undertaking.

In addition to locating a company that is a NRMLA member, it is of paramount importance to work with a CRMP.  The CRMP designation assures you that the person with whom you are working has a proven history, has acquired extensive knowledge of the programs and their regulations, and is viewed as a leader in the industry.

To learn more and find a New Mexico CRMP, click here.

If you choose to work with a loan officer who does not have CRMP status, then you should (at a minimum) ask the person how many reverse mortgage transactions they manage each year and how many years’ experience they have.  A fair gauge is whether or not they have closed at least 48 loans over the past 4 years.  Anything short of this is cause for healthy skepticism. 

Considering the implications and regulations involved in all HECM programs, a high level of expertise in your loan officer is absolutely invaluable, and a CRMP certification is an excellent indicator of the lender’s experience, knowledge and reputation.  Those practicing the origination of reverse mortgages that do not possess this minimum of training and expertise have historically proven themselves lacking in sufficient knowledge to be of maximum benefit to their clients.  In fact, some have led their clients down nearly disastrous roads and near financial ruin owing to their limited knowledge.  Please work with a CRMP!

2 Manufactured Homes & Reverse Mortgages

The typical “bricks and mortar” homes predominantly found in the Metro areas such as Albuquerque, Santa Fe, and Las Cruces are not indicative of the types of dwellings more common to the vast rural areas of the State.  Manufactured homes (MFH) form a good percentage of the residences located in the less populous regions.  There are many lenders, including those specializing in HECM mortgages, unwilling to apply their resources to manufactured homes, perhaps owing to additional procedures and documentation mandatory to the process.

New Mexico Reverse Mortgage is proud to offer our services to those who occupy manufactured homes.  Indeed, there are additional concerns to be addressed when processing a loan for a manufactured home; foremost, a distinction must be made between a mobile home and a manufactured home.  A mobile home is considered, for the sake of titling, to be a motor vehicle; it has wheels, axles, a chassis, or a combination thereof resulting in the designation of “vehicle”.  However, such mobile homes may be converted into qualified manufactured homes by the deactivation of the vehicle title, removal of the wheels and axles, and installation onto a permanent foundation.  Modular (or kit homes) may also qualify, as can homes manufactured off-site and homes that have unique building construction.  Please consult with your loan professional to discuss the possible applicability of such homes to the HECM program.

There are additional guidelines, subject to change, for manufactured homes, including but not limited to:  meeting  all FHA/HUD MFH guidelines; MFH must be double-wide; minimum home size must be 800 square feet; must have been constructed after June 15, 1976; must be on a permanent foundation verified by a structural engineer with an “Engineer’s Report”; must have a data plate and HUD tags; must not be on a leasehold; must not be a mixed use property; must be classified and taxed as “real property”, etc.  If you need the assistance of a foundation engineer, Steve Crawford, PE is an engineer who conducts MFH foundation inspections throughout the State of New Mexico.  He can be called at 505-865-6442.  A title company in your area may also be able to direct you to a qualified engineer.

What is Reverse Mortgage

If you have ever watched the ever-increasing late-night TV commercials showing celebrities endorsing Reverse Mortgage products, you have probably been left more confused about what it all entails than if you had never seen these vague explanations in the first place.

A HECM (Home Equity Conversion Mortgage) is a multi-faceted mortgage product available to homeowners aged 62 and over.  The general overview given in response to consumer inquiries is that a reverse mortgage allows you to borrow against the equity in your home while you still reside in it, and that the loan is not payable until all homeowners have left permanently or passed away.  The HECM program is insured by HUD through the Federal Housing Administration (FHA).  It is a unique and specialized program and therefore, it is not offered as a product by most mortgage lenders.  This is why specialists in the program, such as we at New Mexico Reverse Mortgage, are uniquely qualified to guide the client to the best possible program for their situation.

The process is extensive, including in-depth education and explanations of each program’s pros and cons.  It can be used to pay off existing mortgages and liens, as well as to acquire excess cash for home improvements, vacations, or any other purpose for which you may wish to use your proceeds.  It is suggested that in inquiring about the various programs, you work with a trusted and experienced professional to ensure you are properly educated about the options available.  New Mexico Reverse Mortgage is the premier resource for such professional assistance in the Albuquerque Metro area.