Sound Financial Mortgage LLC
Sound Financial Mortgage LLC is a mortgage brokerage company specializing in reverse mortgage loans. We work with lender that utilize the Home Equity Conversion Mortgage (HECM) which is insured by FHA. We also have access to proprietary jumbo loans when higher home values exceed the FHA limits. Our company is based in Issaquah Washington and we are licensed to serve clients in Washington, Oregon, and California. As a broker, we work with multiple lenders to maximize your lending options. Our focus is to help you make informed decisions about reverse mortgage loans so that you have the best opportunity for success in retirement.
The most important step in the reverse mortgage process is education. Learn about the different types of loans available and see how they apply to your situation. Spend time researching online and from books written by people who are experts on the topic
2. HUD Approved Counseling
If you have determined a reverse mortgage might be right for you, the next step is to make an appointment with the HUD-Approved counselor. The main job of the counselor is to ak questions and provide unbiased feedback. The counselor will educate you on the options available and help you review your budget to ensure that a reverse mortgage is a good short and long term choice.
3. Loan Application and Disclosures
After you receive counseling, the next step is to have your loan officer create the application and disclosures. The application covers your personal information along with other forms that will continue to educate you on the loan. The application has your initial terms of the loan along with your good faith estimate.
4. Order Services
Once the application is signed, the broker or lender will order the services for your loan. The basic services that are ordered are Title and escrow, credit report, and the apprsaisal. The appraisal is important because it's one of the main factors that determine your loan amount.
The underwriter is the person reviewing your paperwork for the loan approval. They review the income, assets, credit, and appraisal to determine if you and your home qualify for a reverse mortgage loan.
6. Sign Loan Documents with a notary
After the loan is approved by underwriting, the next step is the appointment with the escrow company and notary. The final paperwork is signed and notarized and sent back to the lender. Purchases can fund on the same day and refinance loans have a 3 day right of recission before the final closing of the loan.
On funding day, all of the signed documents have been reviewed and the lender sends the wire to escrow and the deed of trust is recorded in your county to make the loan official. If you have proceeds from the loan, they can we wired or a check is sent to you.
8. Loan Servicing
In general, the loan servicing set up takes about 30 days. The monthly statements begin and you are able the progress of your loan. Each year the loan servicing company will certify your occupancy of the residence to ensure you are living in the home.
10-Year Swap: An index used to determine your expected interest rate on an adjustable rate reverse mortgage.
10-Year Swap Rate + Margin = Expected Rate
Activities of Daily Living (ADLs): The six basic everyday activities. These are the activities of bathing, dressing, walking, eating,toileting, and maintaining good personal hygiene.
Adjustable Rate: A rate that adjusts periodically, usually monthly or annually.
Amortization Schedule: The analysis of how a loan behaves over time, given certain variables.
Appraiser: An appraiser is the person who comes to your home and assesses the monetary value of your home based on current market conditions. The appraisal is one of the key factors in determining your loan amount.
Basis Point: One hundredth of one percent; 0.001. In a reverse mortgage, you will see 200 basis points for the Initial Mortgage Insurance Premium (IMIP).
Cap: The upper limit, also known as “the ceiling” for the interest rate.
CMT: The constant maturity Treasury rate (CMT Rate) used to establish the adjustabel rate mortgage rate for reverse mortgage loans.
Draw: Money withdrawn from a line of credit.
Equity: The difference between a home’s market value and the amount of liens on that property.
Appraised Value – Loans or Liens = Equity
Expected Interest Rate: The rate of interest used to determine the amount of money available for a reverse mortgage loan.
Federal Housing Administration (FHA): The department in HUD that provides mortgage insurance on loans made by private lenders. FHA is the government agency that insures the Home Equity Conversion Mortgage (HECM).
Fixed Rate: A rate that never changes and remains fixed for the entire term of the loan.
HECM for Purchase: The reverse mortgage program provided by private lenders and insured by FHA to purchase a home.
Home Equity Conversion Mortgage (HECM): A type of reverse mortgage insured by the federal government and provided by a private lender.
HUD: The U.S. Department of Housing and Urban Development; HUD’s mission is to create strong, sustainable, inclusive communities and quality affordable homes for all.
HUD-approved Counselor: A HUD-approved reverse mortgage counselor is the person responsible to ensure you understand the main points to a reverse mortgage and other options available to you without sales pressure.
Initial Interest Rate: The initial interest rate is the underlying CMT index plus the margin on an adjustable rate mortgage. On the fixed rate mortgage, the actual interest rate is the initial interest rate.
Initial Mortgage Insurance Premium (IMIP): The Initial Mortgage Insurance Premium is the upfront portion of the Mortgage Insurance Premium. Today's upfront premium is 2% of the maximum claim amount.
Irrevocable Line of Credit: A line of credit that can never be revoked, or withdrawn; it is always available for as long as the loan is in effect. Reverse mortgage lines of credit are irrevocable and not based on the change of value in your home like a typical home equity loan.
Line of Credit: The amount of credit that is made available to a borrower to access at any time.
Line of Credit Growth Rate: Your line of credit grows over time based on the unused balance in your line of credit. Think of the line of credit growth as access to more money over the time you have the loan.
Loan-to-value: The loan amount divided by the appraised value of the property and shown as a percentage.
Mandatory Obligations: Any lien, judgment, or mortgage balance which needs to be discharged when you obtain a reverse mortgage. Closing costs and prepaid items like taxes and insurance are also included.
Margin: Add the margin to the CMT index to determine your interest rate for a reverse mortgage.
CMT Index + Margin = Actual Interest Rate
Maximum Claim Amount: The maximum claim amount is the lesser of the appraised value or $1,149,825 for 2024. The calculation to determine your loan amount or principal limit will be based on this number.
Mortgage Insurance Premium (MIP): The purpose of MIP, which is an insurance fee, is to protect lenders against default by a borrower. The HECM loan has an Initial Mortgage Insurance Premium (IMIP) of 2% and a annual (MIP) factor of .5%.
Non-recourse Loan: In a reverse mortgage, the home is the collateral; the lender can only be repaid by the sale of the home, and has no recourse for repayment by any other collateral except the home's value. Most importantly, the heirs are not responsible for any loss from the sale of the home.
Origination Fee: The fee the lender or broker receives for originating the reverse mortgage loan.
Principal Limit: The reverse mortgage loan amount.
Reverse Mortgage: A reverse mortgage is a loan that allows you to convert part of your home equity into loan proceeds based on your age, interest rate available, and appraised value.