Once you have decided that you want to proceed with a reverse mortgage, you may wonder, “OK, What is next?” Below are the steps involved with moving forward with a reverse mortgage.
Finding a Lender
First, you need to find a lender that is a good fit for you. It is recommended to find a direct lender that specializes in reverse mortgages. Before choosing a lender, consider doing a little research on their reputation by reading reviews and checking ratings with Consumer Affairs and the Better Business Bureau. These companies provide unbiased verified reviews and it could be beneficial to select a lender that has positive ratings.
Once you decide on a lender, you will need to call and speak with a licensed loan advisor. Ensure they have a valid license with the Nationwide Multistate Licensing System & Registry (NMLS). An active, licensed loan advisor should provide his/her NMLS ID at the start of the call. Next you can discuss your financial goals and the loan advisor will do a preliminary financial assessment to better understand if a reverse mortgage is a good option for you. The loan advisor will ask for your current income, expenses, estimated property value, and permission to view your credit report. Based on this information, the loan advisor will let you know if a reverse mortgage may be able to help meet your needs and will provide you with some options.
After reviewing your options, you can decide which scenario or product will be the best solution. Then, your loan advisor will send a loan application to fill it out.
Before the lender can start processing your application, you will be required to complete a reverse mortgage counseling session with a Department of Housing and Urban Development (HUD) approved counselor. HUD-approved counseling is a Federal Housing Administration (FHA) requirement for all reverse mortgage applicants. The goal of the counseling session is to make sure that each borrower understands the pros and cons of a reverse mortgage and its obligations1 before they get one. The counselor goes over the requirements of the reverse mortgage and answers any questions you may have. Once completed, the counselor will send the counseling certificate to the lender right away.
Next, your reverse mortgage lender will order an appraisal on your home. The appraisal is required by FHA to determine the value of the house and make sure it is safe and structurally sound. Any repairs needed to bring the home to FHA standards may need to be completed before the loan can close. If the appraiser doesn’t identify any required repairs, they will send the documents with the appraised value to the lender.
Processing and Underwriting
Once the lender receives the completed application, the HUD Counseling certificate, and the appraisal they will begin processing and underwriting on your loan. The Underwriter performs the final financial assessment and may request additional financial documents. Once the Underwriter provides a final approval, the next step is for the borrower to sign the final loan documents.
You will be contacted to schedule the final signing with a notary present. During the closing, you will review the loan documents one more time, read the fine print, and sign all the paperwork. If you have an existing mortgage, it must be paid in full with your reverse mortgage loan proceeds before you can receive additional funds.2 Finally, once all liens are paid off, you have the option of doing whatever you want with the remaining funds.
To find out more about the reverse mortgage process, and to get answers to your questions about the loan, call 1 (800) 976-6211 to speak with a loan advisor.
1 You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance, and maintain the home according to FHA requirements. Failure to meet these requirements can trigger a loan default that may result in foreclosure.
2 Your current mortgage(s) and any other existing liens against the property, must be paid off at or before closing.