Reverse Mortgage Process

Highlights

  • Research about reverse mortgage
  • Obtain loan quotes and rates
  • Receive HUD counseling
  • Apply for a reverse mortgage
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9 Steps to Getting a Reverse Mortgage

Most homeowners have gone through the mortgage process several times before they reach retirement age. This may have been for a variety of reasons: perhaps they bought a new home, wanted to lower their current mortgage rate, or needed to take cash out of their home equity to consolidate other debts or to pay for a big ticket item like college. But mention a reverse mortgage and most homeowners, regardless of their regular refinance experience, will give you a curious look. In fact, reverse mortgages (loans through which seniors can receive income, a lump sum, or a line of credit that are not repayable until death or moving out intervene) are relatively straightforward. Bills.com aims to help you understand the steps you need to complete and help you decide if a reverse mortgage is a good match for your situation.

9 Steps to a Reverse Mortgage

1. Research Reverse Mortgages

There’s plenty of great information available on Bills.com; we will 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.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. Underwriting

The lender’s underwriting department will review your application once all the papers and inspections have been completed and signed.

8. Closing

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.

9. Funding

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 pay off any existing loans on your home.

Get Mortgage Rates!
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6 Comments

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  • JM
    Feb, 2012
    John
    Chicago, IL
    Can someone deed a property in Illinois for $0 to a homeowner and have them then take a reverse mortgage, then pay the proceeds to the individual who deeded the property to them (or satisfying their lien on the property)? i.e. Man buys home in foreclosure rehabs and is now in the property for:
    • $80k
    • appraised value of property 140k
    • man deeds home to low income family member over 62 who truly needs a home

    Man places lien on home, and the family then takes out a reverse mortgage and receives $100k then pays the man the complete $100k less closing costs. Is that legal?

    0 Votes

    • BA
      Feb, 2012
      Bill
      If I understand your message correctly, what you described is not illegal. However, the reverse mortgage lender may have rules that prohibit the reverse mortgage borrower from taking such a large sum immediately upon closing.
      0 Votes

  • JE
    Nov, 2011
    Jen
    Arden Hills, MN
    My mother has been asked by AAG to pay the closing costs associated with a reverse mortgage ($2400) with a check from me to someone (not sure whether it is to an individual or to AAG yet) though she has the funds available. I find this confusing and suspect. Can you shed some light on why AAG has requested this?
    0 Votes

    • BA
      Nov, 2011
      Bill
      You are correct. This does not sound like a reasonable request. Contact the AAG representative and receive exact information regarding to whom the check is being made and for what purpose.

      Only the owner of the property, in your case, your mother, is obligated to cover the costs of the loan. Also, closing costs on a reverse mortgage are commonly financed from the loan itself.

      Read bills.com site about reverse mortgage scams.
      0 Votes

  • JW
    Aug, 2011
    John
    Hartwell, GA
    Can an individual or real estate investment company provide a reverse mortgage, i.e. become the creditor? Also, in the event of a judgement against the homeowner, can the entity holding the judgement force the creditor to accept the total amount (plus interest) paid to the homeowner and negate the lien against the home? Or must the judgement holder pay the creditor the face amount of the reverse mortgage before satisfying a judgement? Finally, can a creditor be forced to relinquish it's security interest by a holder of a judgement against the homeowner?
    0 Votes

    • BA
      Aug, 2011
      Bill
      John, I don't fully understand what you are asking.

      Proprietary Reverse Mortgages can be offered by private firms. While the vast majority of reverse mortgages are FHA HECM loans, borrowers who want to borrow more than the FHA loan limits go to the private market for their reverse mortgage needs.

      If you can clarify for me who is the creditor and who has the judgment, so I better understand the competing claims, I will try to answer your questions.
      0 Votes

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