Washington State Reverse Mortgage Guide
Do you live in Washington state and you’re trying to figure out if you can afford to stay in your home or if you have enough retirement income to cover all of your expenses?
If you are a homeowner who is near or in retirement and you find that you’re in need of additional funds to pay for bills, do much needed home repairs, or simply have enough on hand in the event of those unplanned expenses, you do have options.
One of those options is a reverse mortgage, which provides homeowners with a path that will allow them to supplement their retirement income by tapping into the wealth they already have in their home without having to take on monthly mortgage payments.
Keep reading to find out if a reverse mortgage is a viable option for you.
What is a Reverse Mortgage?
A reverse mortgage is a financial product designed exclusively for homeowners who are at least 62 years old. This financial tool is a loan, similar to a traditional mortgage, but with a key difference—it enables homeowners to leverage the equity accumulated in their homes to access funds without the obligation of making monthly mortgage payments.
A reverse mortgage can only be used on a property that is the primary residence of the homeowners. In addition, the homeowners must be current on their property taxes and homeowner’s insurance.
The most prevalent type of reverse mortgage is known as the Home Equity Conversion Mortgage (HECM). HECM reverse mortgages are regulated by the U.S. Department of Housing and Urban Development (HUD) and backed by the Federal Housing Administration (FHA).
When a homeowner takes out a reverse mortgage, the first thing it will do is pay off the current traditional mortgage, if the homeowners still have one on their home. Any remaining equity will go directly to the homeowners.
The options for receiving reverse mortgage proceeds include a lump sum payout, monthly payments, establishing a line of credit that can be accessed on an as needed basis, or a combination of these methods.
A reverse mortgage is paid back when the homeowners no longer live in the home full time, they decide to sell the home, or when the last remaining borrower passes away.
Benefits of a Reverse Mortgage
One of the most appealing aspects of a reverse mortgage is its versatility in meeting your financial needs. The way you receive the funds depends entirely on your individual requirements and goals.
For instance, if you have substantial home improvement projects in mind, you may opt for a lump sum payment. Alternatively, if you aim to bolster your retirement income, you can choose to receive the funds as monthly payments. Alternatively, if you prefer to have the funds available for unexpected expenses, a line of credit may be your preferred choice.
The second most appealing aspect of a reverse mortgage is that there are no rules about how the money can or can’t be used. Some common uses include the following:
- Supplementing income
- Home renovations
- Paying off credit card debt, personal loans, or medical bills
- A rainy day fund
What Types of Reverse Mortgages Can You Get in Washington State?
In Washington state, there are four types of reverse mortgages that are available to homeowners:
HECM Reverse Mortgages
The Home Equity Conversion Mortgage (HECM), the most common type of reverse mortgage, is the predominant type of reverse mortgage offered by a majority of lenders, including Mutual of Omaha Mortgage. These reverse mortgages are backed by the federal government. Eligibility for HECM reverse mortgages is limited to borrowers who have reached age 62, making them a valuable financial tool for retirees. There are no specific requirements for how the funds must be used, and homeowners have options for how they want to receive their funds. However, there is a lending limit imposed by the FHA, with the current limit for 2024 set at $1,149,825
Jumbo Reverse Mortgages
For homeowners whose properties exceed the FHA lending limit, jumbo reverse mortgages are an alternative. Many prominent lenders offer these proprietary reverse mortgage loans, often assigning them distinctive names. At Mutual of Omaha Mortgage, we offer the HomeSafe Reverse Mortgage. In the case of the HomeSafe Reverse Mortgage, eligible homeowners can borrow up to $4 million.
Reverse Mortgage for Purchase
The Home Equity Conversion Mortgage for Purchase (HECM for Purchase) is a financial solution designed to help homeowners purchase a new home in retirement. With this innovative option, Washington homeowners can finance a portion of their new home using a reverse mortgage, alongside a substantial down payment derived from the sale of their previous residence. This strategic approach allows retirees to “right size” their retirement home, whether they want to upsize or downsize. A HECM for Purchase makes this possible without the burden of traditional monthly mortgage payments.
Single-Purpose Reverse Mortgage
The single-purpose reverse mortgage is also sometimes referred to as tax deferral programs and deferred payment loans. This type of reverse mortgage is used the least of the four types. Homeowners have to be 62 years of age to qualify, and as the name implies, they may only be used for a single purpose. In most cases, single-purpose reverse mortgages are used for home repairs and upgrades.
Washington State Reverse Mortgage Requirements
A reverse mortgage comes with very specific requirements, including the following:
- Age. At least one of the homeowners must be at least 62 years old.
- Residency. The property needs to be the primary residence of the homeowners. This means that a reverse mortgage cannot be used on a secondary home such as a vacation home.
- Equity. There needs to be equity built up in the home.
- Condition of the Property. The property needs to be in good, maintained condition.
- Obligations. The homeowners must be able to continue to meet the obligations of the property, which includes continuing to pay for property taxes, homeowners’ insurance, maintaining the home, and pay any other required fees, such as HOA fees.
- Property Type. The home must also be a single-family home, a two-to-four-unit property in which the homeowners live in one of the units, or an FHA approved condominium or manufactured home.
- Counseling. Before homeowners may submit their application for a reverse mortgage, they must also complete a counseling session with a third-party HUD-approved counselor.
Washington State Reverse Mortgage Borrower Rights
Until 2022, Washington state residents were limited to the lenders that they could obtain a reverse mortgage from due to legislation from 2008 that made it more difficult for Washington consumers to secure a reverse mortgage. The 2022 law brought an end to those limits.
The federal government has a number of protections in place for reverse mortgage borrowers, including the following:
- Non-Recourse Loan. The non-recourse protection means that borrowers and their heirs will never owe more on the reverse mortgage loan than the home is worth when it is sold to repay the loan. In other words, if the loan balance exceeds the home’s value at the time of repayment, neither the borrower nor their heirs are held responsible for the shortfall. This protection provides peace of mind for borrowers and ensures that the loan will not negatively impact their estate or heirs.
- Loan Disclosures. Lenders are required to provide borrowers with detailed disclosures outlining the terms and costs associated with the reverse mortgage. This includes information about interest rates, fees, and loan options.
- Right to Cancel. Reverse mortgage borrowers have the right to cancel their reverse mortgage application at any time during the application process, including within three business days of signing to closing loan documents.
These rights and protections underscore the government’s commitment to safeguarding the interests of reverse mortgage borrowers and promoting responsible lending practices within the industry.
In addition to the protections afforded to consumers by the FHA and HUD for HECM reverse mortgage loans, Washington State also has a list of requirements for Washington residents who are obtaining a propriety reverse mortgage, such as a jumbo loan.
Washington Reverse Mortgage Calculator
If you are considering a reverse mortgage loan and want to know your potential loan amount, we encourage you to explore our Reverse Mortgage Calculator.
However, it’s important to emphasize that the figure generated by this calculator is an estimate and may not represent the final approval amount.
For a more precise assessment tailored to your individual circumstances, we strongly advise talking to one of our qualified reverse mortgage loan specialists.
The Washington State Reverse Mortgage Loan Application Process
If you are thinking about getting a reverse mortgage in the state of Washington, here is what you can expect during the loan application process:
Step 1: Free Consultation with Reverse Mortgage Specialist
The first step is to meet with one of our reverse mortgage loan advisors who will assess your situation, provide an estimate of potential benefits, and address any questions you may have. The Mutual of Omaha Mortgage loan specialists will work with you through the entire process.
Step 2: Counseling
The next step entails participating in a counseling session conducted by a HUD-approved third-party counselor. This session serves the purpose of educating you on various aspects of reverse mortgages, including their features, suitability for your specific situation, and alternative financial options. Upon successful completion of the counseling session, the counselor will provide you with a certificate, which must be presented to your lender as a prerequisite for formally initiating the reverse mortgage application. This pivotal step is designed to ensure that you are making a well-informed decision.
Step 3: Submit the Application
Upon obtaining the counseling certificate following your counseling session, your dedicated reverse mortgage loan advisor will guide you through the process of submitting your application along with the necessary documentation. These documents typically include a valid photo ID, proof of homeowner’s insurance coverage, and the current property tax bill. Timely collection and submission of these essential documents at this stage are instrumental in expediting the loan closure process, ensuring a smoother and more efficient experience.
Step 4: Appraisal
Following the submission of your application, Mutual of Omaha Mortgage will order a comprehensive home appraisal. The appraisal is a pivotal step in evaluating both the current condition and market value of your property, serving as a crucial factor in determining the eligible loan amount. Concurrently, we will also work on obtaining other information, including a thorough title search and credit report, to identify any potential liens and assess your financial stability. Expect this step to take one to two weeks.
Step 5: Underwriting and Processing
Following the submission of your application and documentation, the underwriting process begins. During this phase, the underwriters conduct a review of the application. If deemed necessary, the underwriter may request supplementary documentation or recommend specific home repairs to meet the requirements for approving the loan. Your reverse mortgage loan advisor will maintain open lines of communication with you throughout this process, notifying you of any actions that need to be made.
Step 6: Sign Closing Loan Documents
Once the application is approved by the underwriter, a closing date will be set. Applicants typically have the option to sign the closing loan documents at the title company or at home with the help of traveling notary service.
Step 7: Start Receiving Funds
There is a three-day business day waiting period before borrowers may start receiving their funds. Once that waiting period is over, funds will be received as a lump sum, monthly payments, and/or a line of credit.
Find a Washington State Reverse Mortgage Loan Officer in Your Area
Mutual of Omaha Mortgage is a licensed Reverse Mortgage lender in the state of Washington. You can get started by calling 800-578-0283 or filling out this form here.
You can also find a Washington Reverse Mortgage loan officer in your area through our loan officer directory or by clicking on one of the links below to find a loan officer near you:
- Seattle Reverse Mortgage Lender Near Me
- Spokane Reverse Mortgage Lender Near Me
- Tacoma Reverse Mortgage Lender Near Me
- Vancouver Reverse Mortgage Lender Near Me
- Bellevue Reverse Mortgage Lender Near Me
- Kent Reverse Mortgage Lender Near Me
- Everett Reverse Mortgage Lender Near Me
- Spokane Valley Reverse Mortgage Lender Near Me
- Renton Reverse Mortgage Lender Near Me
- Federal Way Reverse Mortgage Lender Near Me
Reverse mortgage borrower must occupy home as primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.
This information is intended to be general and educational in nature and should not be construed as financial advice. Consult your financial advisor before implementing financial strategies for your retirement.