Reverse mortgage borrowers usually spend a few months researching on their own before speaking with a lender. After receiving a quote from a licensed loan advisor, they often take some time looking over their personalized information and weighing the pros and cons of a reverse mortgage before deciding to move forward. Once a homeowner applies for the loan, the process typically takes 30-45 days. Generally speaking, these are five steps in the reverse mortgage loan process:
Step 1. Application
Once you decide to move forward with a reverse mortgage, sending in your application is the 1st step. Applying for a reverse mortgage does not mean you are required to move forward with the loan. It merely allows the lender to begin processing your information.
Step 2. Reverse Mortgage Counseling
Reverse mortgage counseling can be completed before or after submitting your application. However, your loan cannot move on to step three until your lender has proof that your counseling has been completed, so send your lender your signed counseling certificate as soon as you can. Once your lender receives the document, they can move forward with processing your application and ordering your appraisal.
Step 3. Appraisal
The appraisal is used to determine how much your home is worth. The lender will have your home appraised by an independent FHA (Federal Housing Administration) approved appraiser that must follow FHA property appraisal guidelines.
Step 4. Underwriting
In this step, the lender’s FHA approved underwriter will review your loan application package to determine if your financial condition and home meet FHA guidelines. When your application has passed through underwriting your loan will be considered “clear to close,” meaning that your application has been fully vetted and you can set a date to sign the closing documents.
Step 5. Loan Closing and Funding
“Closing” refers to the signing of the closing documents, which usually takes place at a title company, attorney’s office, or with a mobile notary. The closing documents will reflect the final terms of the reverse mortgage loan, including the loan amount, interest rate, fees, and loan proceeds after any existing mortgages have been paid.1
For standard reverse mortgages, called refinances, there is a mandatory three business day “right of recession” period after you sign the closing documents. This means that you have three business days to change your mind and cancel your application. Once the right of recession period has passed, any available proceeds will be disbursed to you. This process is known as “funding” and based on your preference you can receive your funds any way your title company offers; check, wire transfer, etc.2
If you are considering a reverse mortgage loan, it may be useful to try our calculator to receive an estimate of how much you may receive. If you wish to speak with a licensed loan officer call 1.800.976.6211 M-F 8:00 AM -5:00 PM PT.
1 Your current mortgage(s), and any other existing liens against the property must be paid off with the reverse mortgage proceeds.
2 The funds available to the borrower may be restricted for the first 12 months after loan closing, due to HECM reverse mortgage requirements. In addition, the borrower may need to set aside additional funds from the loan proceeds to pay for taxes and insurance. This disbursement option is only available for a fixed rate loan.