How Does a Wells Fargo Reverse Mortgage Work?
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Preparation
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Prior to obtaining a reverse mortgage from Wells Fargo, all applicants must meet with a reverse mortgage counselor. This is a requirement mandated by the Housing and Urban Development Administration. These counselors review each applicant on a case-by-case basis and determine if a reverse mortgage is beneficial, and if so, what type would best suit each borrower. Wells Fargo offers a few varieties of reverse mortgages including: an HECM (Home Equity Conversion Mortgage), a lump sum reverse mortgage, and a line of credit reverse mortgage. Each type has advantages and disadvantages--it is the responsibility of the reverse mortgage counselor to determine the best fit for each potential borrower.
Eligibility
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Reverse mortgages are products available to all seniors aged 62 and older, who own a single-family, one to four unit home, condominium or townhome. Qualifying for a reverse mortgage is much like qualifying for a traditional mortgage. Borrowers must have satisfactory credit, income, equity and mortgage history. A loan amount is determined by the amount of equity in the property and any existing mortgages on the property. Usually lenders will not finance 100 percent Loan to Value (meaning a lender will not lend $200,000 on a free and clear property worth $200,000).
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The Process
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Borrowers choose a reverse mortgage option prior to funding a loan. Borrowers can choose to receive a lump sum payment, a monthly stipend, a line of credit or some combination of all three. A loan application is filed and an appraisal is conducted on the property. If there is an existing mortgage on the property, most lenders will require that it is paid with the reverse mortgage proceeds. A reverse mortgage comes due when either the property is sold or the homeowner passes away.
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