Frequently Asked QuestionsFAQs
General FAQs
What is a good definition of a “Reverse Mortgage”?
It is a home loan that could allow older homeowners (62 and older) to access a portion of their home equity now in a lump sum or over time with monthly draws or a growing line of credit.
What is the difference between a 1009 and a 1003 application?
The 1009 is the required application form to be used specifically for Reverse Mortgages. The 1003 is commonly used for traditional mortgages.
For how much can I qualify?
That will depend on your age, the interest rates, and your home’s value. Older borrowers generally qualify for more funds, as well as lower interest rates.
Does FHA round up borrower ages?
Yes, but the youngest borrower must already be 62. If the closing occurs within 6 months of the youngest participant’s next birthday, FHA rounds up to the nearest age for calculating the borrower’s Principal Limit.
Can a borrower go into assisted living?
Yes, for a period of time. However, if no borrowers remain in the home after 1 year, it is considered permanently vacating (a maturity event).
Can the heirs refinance the property?
Yes. After the borrowers have passed, the heirs may seek financing of their own to refinance the home, often for the lesser of the mortgage balance or the property value.
Is there a monthly service fee?
Servicing fees are based on market conditions at the time of origination, and at this time, we do not have servicing fees on HECMs. If that changes, it will only be for new applicants.
What happens when the borrower dies?
The heirs have the opportunity to sell the home. The HECM is paid off at closing, and any remaining equity becomes their inheritance. Otherwise, they can refinance, pay off, or walk away through the use of a Deed in Lieu of foreclosure.
HECM For Purchase
Can we set-aside funds for repairs to be completed after closing?
No. All repairs must be completed by the seller, and paid for by the seller, prior to loan closing.
Is Home Inspection Required?
Not usually, unless it is in the sales contract or the appraiser notates a need.
What fees can the seller pay?
The seller can ONLY pay their pro-rated share of taxes or HOA dues, transfer or intangible taxes, costs of repairs, and fees that are required to be paid by the seller for the seller’s benefit.
What fees may be different from traditional HECMs?
Owner’s Title Policy, Transfer Taxes, Homeowners Insurance. Also review the purchase contract to see what additional fees will be required.
Counseling FAQs
Are counselors part of the government or are they a private company?
HECM counselors usually work for non-profit organizations, but they are approved by HUD and in some cases by their state. In addition, they are required to complete training so they can advise the client on more than just HECMs.
Does the counseling have to take place before the application?
That is preferable. HUD allows the application to be taken first, but no processing can take place until the lender has a signed and dated counseling certificate. There are, however, five states that do require counseling to take place on or before the date of application. They are California, Minnesota, Tennessee, Vermont, and Rhode Island.
How long is a typical counseling session?
It depends on the agency and the borrower’s needs, but may take up to an hour or more.
Is counseling required for HECM to HECM refinances?
In most cases – Yes. The program changes periodically and an updated counseling cert will be required. However, the borrower can waive counseling with a letter of explanation if their prior HECM closed within five years of the new application date (except in California, Massachusetts, Minnesota, North Carolina, Tennesee, Texas, and Vermont).
When does a counseling certificate expire?
The certificate expires 180 days from the day the counseling was completed. However, it is generally alright for it to expire during processing. Yet, if we have not assigned it an FHA case number by the expiration date, the borrower will need to be re-counseled.
Where do I go for counseling?
Your loan originator will generate a list based on the subject property zip code. It will include the 8 national agencies as well as local counselors so the borrower can meet face to face.
Who must attend counseling?
All borrowers, co-borrowers, POAs for incompetent borrowers, conservators, and guardians are required to be counseled.
Things to know about Reverse Mortgages:
- At the conclusion of a reverse mortgage, the borrower must repay the loan and may have to sell the home or repay the loan from other proceeds
- Charges will be assessed with the loan, including an origination fee, closing costs, mortgage insurance premiums and servicing fees
- The loan balance grows over time and interest is charged on the outstanding balance
- The borrower remains responsible for property taxes, hazard insurance and home maintenance, and failure to pay these amounts may result in the loss of the home
- Interest on a reverse mortgage is not tax-deductible until the borrower makes partial or full re-payment
How do I start the application process?
There are two easy ways to get started with Open Mortgage:
1. Locate the office closest to you and speak to a Loan Originator.
2. Send us a message and someone will contact you to discuss your options.
Where do I send my first payment?
All payments must be in the form of a personal check, cashier’s check or money order, and mailed to Open Mortgage LLC Attn: Accounting Department 14101 W Hwy 290 Bldg 1300 Austin, TX 78737. Be sure to include a name and loan number. If you have any questions please call us at 888-602-6626 x 114.
Why should I consider a refinance?
People choose to refinance their homes for many reasons. If you are interested in lowering your interest rate, reducing your monthly mortgage payment or cashing out on your home equity, refinancing might be a good option for you. Finance charges may be higher over the life of the loan.
What documents will I need to have ready?
In most cases, documents that verify employment, income and assets will be required. These can include:
Social Security Number
Last two months of paystubs
Past two years of W-2 forms
Two to three months of bank statements
One to two years of federal tax returns
Any information regarding current debt (student loans, car loans, credit cards, etc.)
What is an FHA loan
An FHA loan* is a mortgage loan that is insured by the Federal Housing Administration (FHA).
FHA loans are popular with first-time homebuyers because the requirements are less strict
than conventional loans.
*Open Mortgage, LLC and it’s DBA is not acting on behalf of or at the direction of the federal government.
In what states are you licensed?
Open Mortgage is currently licensed in 48 states and the District of Columbia. Visit our Licensing page for a complete list.
What is the difference between a Mortgage Broker and a Mortgage Banker?
Open Mortgage has been a Mortgage Banker for over fifteen years. When you work with a Mortgage Banker, you interact with the same people from the same company throughout the entire process – from application to close – ensuring special attention to detail. A Mortgage Banker approves the loan and can generally offer lower rates/costs and a quicker process. That is not always the case with a Mortgage Broker. A Mortgage Broker is a middleman that brings you to the lender who approves the loan, which could result in a higher cost for you.
What is the difference between interest rate and APR?
Your interest rate is the monthly cost you pay on the unpaid balance of your home loan. An Annual Percentage Rate (APR) includes both your interest rate and any additional cost or prepaid financial charges such as the origination fee, points, private mortgage insurance, underwriting and processing fees. (Actual fees may or may not include these charges). While your interest rate is the rate at which you will make your monthly mortgage payments, the APR is a universal measurement that can assist you in comparing the cost of mortgage loans offered by different Mortgage Bankers (Lenders).
How is my information used to come up with loan options?
When using our mortgage calculators, we try to customize the loan to what you are looking for – a new home, a lower rate, cash from your home, etc.
How important is the Loan-To-Value (LTV) ratio in refinancing?
The loan-to-value ratio [LTV] shows how much equity you have in your home. Equity is the difference between how much your home is worth and how much you owe on it. For instance, if your home is worth $150,000 and you owe $100,000 on your mortgage, then you have $50,000 worth of equity in your home. To calculate your LTV, divide your current loan amount by your home’s value. In this example above, your LTV would be 67%. In the mortgage world, higher loan-to-value (or lower equity) means there is a greater risk the borrower may default on the loan. Therefore, in refinancing your home, LTV is important in determining qualification for home loans and rates. Generally speaking, the lower your LTV, the lower your rate.
Are the pre-qualification services free?
There is no charge for getting pre-qualified. You are not under any obligation to use our site to apply for a loan, even if you use our mortgage calculators.
