Reverse Mortgage FAQs
Reverse Mortgage Pro
How does the reverse loan process work?
One of the top reverse mortgage FAQs concerns the necessary steps to apply for a reverse loan. The entire procedure typically takes between 30 and 45 days. Let us break it down for you.
Education
We have seen ads on TV or received mail about the reverse mortgage program. After all, it has been available for the past 25 years. However, a 60-second ad or marketing letter in the mail leaves a lot of detailed analysis with all your questions and concerns addressed to ensure a reverse mortgage is right for you.
Financial Assessment
This step is done by phone with your loan provider before meeting them. By providing some basic application information, they can tell you what you should qualify for before moving forward.
Doing so also helps ensure the reverse mortgage program’s long-term success. The HUD requires your lender to review each applicant’s credit, income, tax, and homeowner’s insurance payment history for the past two years. With that, they can evaluate the applicant’s ability to pay future real estate tax and insurance payments.
Counseling
Counseling is an important part of the process and must be provided by an independent, HUD-approved third-party counseling agency. The counselor will explain the program options, conduct a financial review with you, and answer your questions—the same things your mortgage professional will do.
This way, you are hearing and learning about the program from two independent sources, which should help you understand reverse mortgages better and ensure that everything has been explained correctly. They have a small fee the borrower pays, but it can be included in the loan closing in most cases.
Additionally, your reverse mortgage professional will provide a list of counseling agencies from which you can choose. Many times, counseling can be completed over the telephone. You will also receive two certificates, one of which you must sign and give to your lender. Otherwise, they cannot begin processing the paperwork for your loan.
Application
To complete your application paperwork, you may meet your trusted reverse mortgage loan provider before or after counseling. Unlike other companies, we have zero upfront, out-of-pocket fees. We have local reverse experts in North Carolina and Virginia offering no-cost, no-obligation home appointments for our client’s convenience.
Your loan officer will help you decide if the reverse is right for you and, if so, which program option best suits your needs. Afterward, you will be left with a complete copy of all the application documents for you and anyone you wish to share them with. If you want to have a family member at your appointment, we encourage it as the more folks learn about this great financial planning tool for seniors, the better.
Reverse mortgages give you the peace of mind of a government FHA-insured loan where your home equity is available for you to use under a payment-optional plan. So, you can never risk losing it if you cannot make a mortgage payment.
Appraisal
We will order your FHA appraisal once you have provided your HUD counseling certificate. The value will be determined by this 30-page report, which will be based on your house’s condition and what three to five comparable properties in your area have recently sold for. Once again, we do not require you to advance the cost of this service as it can be included in the closing of your loan. You can also pay after the service if you decide not to proceed.
Processing and Underwriting
We will assign a processor in our office to prepare your file and have it approved by the HUD-approved underwriter. That includes securing your appraisal and title report, getting mortgage/lien payoffs, and verifying income and credit items. We will contact you during this process. Once the FHA underwriter has approved your file, we will contact you to advise you on the final numbers based on the actual value and your loan approval.
Closing and Disbursing Your Funds
We will arrange for the closing agent to meet with you to review the final loan documents. After signing the closing documents, you will have three days to review them before finalizing the mortgage. Once that period has passed, your funds will be wired to pay off any mortgages/liens and deposited into your bank account, depending on your plan.
What can I expect to learn from my housing counseling appointment?
Accredited housing counselors work with seniors to help them evaluate the viability of a reverse mortgage loan by looking at the borrower’s following information:
- Current Budget
- Monthly Income
- Loan Risks
- Loan Benefits
- Interest Rates
- Associated Fees
HUD-approved HECM housing counselors are required to use loan comparison and analysis software that meets the requirements established by the AARP. Certified counselors must also adhere to the AARP Foundation Reverse Mortgage Education Project counseling policies and procedures. They may also review financial options with you to ensure that you make a responsible financial decision.
The AARP Foundation Reverse Mortgage Education Project regulates a national network of HUD-approved HECM housing counseling agencies. They administer the exam that certifies counselors for these agencies, and their counseling network consists of the exam’s highest-scoring counselors. With that, you can be sure that they are looking out for your best interest.
How do I avoid reverse mortgage fraud and scams?
Talk to your counselor. Start by scheduling an appointment with a HUD-approved reverse mortgage counselor. It is their job to help you understand reverse mortgages and help you evaluate your situation. So, don’t pay for information that should be free.
Look closely at the terms and conditions. Watch out for unethical terms and extraneous fees. Your HUD-approved counselor can help you look for these, so don’t hesitate to ask. Also, if you are concerned that a lender may be violating the law, report them to your reverse mortgage counselor.
You have three days to change your mind. Typically, you have three business days after closing on the loan to back out, regardless of the reason.
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