The reverse mortgage loan process is generally the same regardless of which lender you choose. However, the following are some reverse mortgage tips that can help you prepare and may even streamline the process. Two of the steps that involve homeowner engagement are: 1) the Housing and Urban Development (HUD) counseling session1 and 2) the appraisal of the property. Preparation for these tasks can be tricky so we’ve compiled a list of reverse mortgage tips for those going through the process.
The purpose of the required counseling session is to:
- Ensure homeowner/s understand the features, benefits and obligations of a Home Equity Conversion Mortgage (HECM)
- Confirm that the homeowner/s have a general knowledge of the product and their obligations
- Explore the homeowners unique set of circumstances, providing insight as to whether or not a HECM loan is right for them
Tips to Prepare for Counseling
Prior to the counseling session each document should be reviewed, and any questions should be addressed with the loan advisor.
- How to Schedule: The advisor will provide a list of approved HUD counseling agencies that the homeowner can choose from. However, lenders are not allowed to steer you towards one counselor so you are welcome to choose one yourself on HUD’s website: https://apps.hud.gov/offices/hsg/sfh/hcc/hcs.cfm. It is important when calling to request an appointment for “Reverse Mortgage Counseling” and tell the counseling agency that you already have the required documents to avoid unnecessary delays.
- What to Expect: Expect the session to take 1.5 to 2 hours. The HUD approved counselor may utilize one of the following two worksheets:
- HUD’s Financial Interview Tool worksheet (“FIT”) includes questions that cover a wide range of topics intended to provide a more comprehensive dialogue about the homeowner’s financial situation.
- Benefits Check-Up worksheet (“BCU”) is only required when total household income is below 200% of the National Poverty Level or for clients who are disabled, but is recommended for all reverse mortgage borrowers.
- Note: While completion of HUD counseling is required in order to proceed with the application process for a HECM loan, participating in the counseling does not obligate you to proceed.
An appraisal is required by the Federal Housing Administration (FHA) to determine the home’s value and to make sure the home is safe, structurally sound and does not represent a risk to homeowner health and/or safety of the property. Minor cosmetic issues are typically not a concern.
Tips to Prepare for an Appraisal
Consider these tips in advance to minimize the risk of the appraiser needing to return to complete the inspection:
- Plan for the inspection to take about an hour to complete.
- Provide unobstructed access to the attic and/or crawl space.
- Ensure all smoke detectors are installed and functioning properly.
- Ensure the water heater has proper strapping.
- Ensure that carbon monoxide detectors are installed and functioning.
- There is no need to scrub your house clean, but decluttering can help the appraiser see your home more clearly.
What happens after the appraiser leaves?
The appraiser will look at comparable homes in your local area as part of the process for determining the home value and generally needs a few days to complete the report.
As of October 2018, the FHA performs a Risk Assessment on each appraisal to determine if the appraisal is acceptable or if a second appraisal is required. It generally takes 24 hours for the FHA to make that determination. If a second appraisal is required, a new appraiser will call to schedule an appointment.
It is important to be prepared for all aspects of the reverse mortgage process to ensure the timely processing of the loan. Whether you’re at the beginning of your research into reverse mortgages or ready to apply, a licensed loan advisor can help guide you through the process. Call 1 (800) 976-6211 to speak with a loan advisor today!
1 The U.S. Department of Housing and Urban Development (HUD) provides a list of approved reverse mortgage counseling agencies for you to choose from. The purpose of this requirement is so you are aware of all of your options, and can evenly weigh the pros and cons of each.