How does the Reverse Mortgage process work?
Do your research. Read up on the process as much as you can. Talk to your local Better Business Bureau (BBB) and your local American Association of Retired Persons (AARP) about the process and the lender. The AARP Foundation Reverse Mortgage Education Project includes a national network of reverse mortgage counselors dedicated to helping seniors understand and evaluate the risks and benefits of reverse mortgage borrowing.
Federal regulations and state law often requires that reverse mortgage borrowers receive state-certified housing counseling. And while this counseling is mandatory for HECM and Home Keeper reverse mortgage borrowers, the service is free. Counseling appointments typically take about an hour and may be handled in-person or over the telephone.
Your lending agent will require you to complete a loan application and determine how to receive payment.
These are you options:
1. Monthly income for a fixed term, or life
2. Line of credit
3. Lump sum
4. Any combination of the above 3
Your lender will order:
- A credit report
- A title report
- An appraisal
- Lien payoffs
Once your lender has received and completed the required documentation, your loan package will be submitted to the financial organization that will be underwriting the loan, for final approval.
After your reverse mortgage loan has been approved and signed, the loan’s initial interest rate will be determined. Closing costs are typically financed by the loan.
Once you have officially closed on the loan, you have 3 business days to change your mind and cancel the loan. Atter the 3-day period, the funds are disbursed, including any amount that will be applied to a previous lien on the property. Then you will begin receive payments according to the payment option you selected.
You will not be required to make monthly payments during the term of your loan. The reverse mortgage becomes due and payable in full once: 1) the home is no longer being used as a primary residence, 2) it is sold, or 3) the borrower passes away. Upon the death of the borrower, the loan may be repaid from the sale of the home or by refinancing the existing reverse mortgage. All remaining equity belongs to the heirs/estate.
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 borrowers:
- 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. Because it is their job to help insure that you are making a responsible financial decision, they may also review financial options with you.
The AARP Foundation Reverse Mortgage Education Project regulates a national network of HUD-approved HECM housing counseling agencies by administering the exam that certifies counselors for HUD-approved HECM housing counseling agencies. HUD’s National HECM Counseling Network consists of the exam’s highest scoring counselors. That means that that you can be sure that they are charged with looking out for your best interest.