Getting a reverse mortgage is, in general, an eight-step process, which I outline below. Step 2 will help you chose one of the many reverse mortgage lenders available to you. Before I launch into the process, let us review reverse mortgage basics.
Reverse Mortgage Basics
A reverse mortgage is a unique mortgage because they are no payments required from the borrower. Instead the homeowner receives cash from the lender and in turn, the lender receives a portion of the homeowner’s equity. A reverse mortgage loan is designed to give older homeowners the ability to receive tax-free income without having to make payments, sell their home or affect their hold on their title. For older homeowners (must be 62 years or older to qualify) a reverse mortgage can be the right way to receive either extra income or security in retirement.
The loan is repaid when the borrower ceases to live in the home. This can be a result of the homeowner selling the home, moving out (and it is no longer their primary residence), or dying. In any of these cases, the lender receives the proceeds of the sale of the home to pay off the balance of the reverse mortgage loan. If the proceeds of the sale exceed the outstanding loan balance, the difference is paid to the borrower or to their estate. On the other hand, if the proceeds of the sale are less than the loan balance, then the lender (and not the homeowner or the homeowner’s estate) has liability for the deficiency.
Let us now turn to the 9-step process.
The Reverse Mortgage Process at a Glance
- Research Reverse Mortgages
There’s plenty of great reverse mortgage information available on Bills.com. We can help you in your learning process. Make sure to seek advice from trusted friends or others who have taken out or considered a reverse mortgage. Their perspective can be invaluable.
- Obtain Quotes
The next step is to find a trusted lender or reverse mortgage broker who can assist you with your needs. Read reverse mortgage lender profiles in Bills.com’s Reverse Mortgage Lender Reviews section. Bills.com can also match you with one of many credible lenders such as One Reverse Mortgage, Golden Gateway, and Generation Mortgage. Get a free quote today. We will discuss more about this step below.
- Lender Consultation
Evaluate your potential lenders to make sure you are comfortable working with the lender. Read their customers’ testimonials. Find out if they are registered with the BBB (Better Business Bureau) or NRMLA (National Reverse Mortgage Lender Association) and if they are a FHA/HUD approved lender. Additionally, be sure to compare the offers you receive to determine if you are getting the most competitive rates.
- Apply for a Reverse Mortgage
Begin your application with your lender in person or over the phone. Review your application carefully before signing. The lender will finally review and confirm your application’s information.
- HUD Counseling
A HUD consultation is one of the most important steps in the application process. The government requires that any prospective applicant for a HECM reverse mortgage receives counseling with a third party HUD-certified counselor. This step in the process is designed to help ensure that seniors understand the risk and dangers of a reverse mortgage and that they have evaluated their financial situation closely. Any lender will require a signed certificate from the counselor before moving on to the next step in the application process. Counseling is recommended for all borrowers, even if they are considering a private reverse mortgage loan.
- Home Appraisal and Inspection
An appraisal will be conducted to determine the market value of your home, check for any necessary repairs, and to ensure that the home falls within the government’s guidelines for a reverse mortgage. A structural inspection may also be needed depending on the home’s condition.
The lender’s underwriting department will review your application once all the papers and inspections have been completed and signed.
Once the underwriter has approved your application, you and your lender will schedule a meeting to finalize the paperwork. Before signing and closing any loan, review your application and confirm that all your personal information is correct and complete. Additionally, check the loan’s terms and conditions and confirm that they match what you agreed with the lender. If the information is correct, complete your application by signing the papers. After signing, please note that you have three business days to cancel the loan. This period is called the rescission period.
The final step in the process is. of course, to receive your funds! Funds can be received as a lump sum, a line of credit, or a monthly fixed payment and can be used for any purpose, once you’ve paid off any existing loans on your home.
Finding a Reverse Mortgage Lender and Quotes
As discussed in Step 5, a reverse mortgage is a more complex version of a mortgage. Accordingly, fewer mortgage originators sell reverse mortgages because of the complexity and additional time required. You will be able to find a reverse mortgage lender in your area.
It is not necessary for you to get a reverse mortgage from with a person who happens to work nearby. You can work with a national lender that serves people across the country. A mortgage, whether it is reverse or forward, is a commodity. Shop to find the best rates and terms. If a local lender meeting your needs with competitive rates, great! If not, then shop and work with a national lender. Read reverse mortgage lender profiles in Bills.com’s Reverse Mortgage Lender Reviews section.
More on Reverse Mortgages
Bills.com has written extensively about reverse mortgages. See the following Bills.com resources to learn more: Reverse Mortgage & Inheritance, Reverse Mortgage and Medicaid, Is a Reverse Mortgage a Good Choice?, Reverse Mortgage Living Trust, Reverse Mortgage Benefits, Reverse Mortgage Refinance,and the Bills.com reverse mortgage information page.
I hope this information helps you Find. Learn & Save.