Understanding the Process
Counseling
Application/Disclosure
Processing
Closing
Disbursement
Repayment
Awareness and Education
You may learn about reverse mortgages from a mailer, the internet, a news article, advertisements, a friend or neighbor, seminars, or even a call from a lender. Once you have heard of the reverse mortgage, now what? What is the process? We have attempted to outline the standard process.
1. Consultation
The process starts with a free consultation from a dedicated reverse mortgage expert. They will review your financial situation with you and help you to make an educated choice about whether a reverse mortgage is right for you. If you are speaking with a broker, you can discuss options from several lenders and they can recommend the loan product that best suits your needs. You should at this time receive a free estimate, customized to your own needs and goals, which would include an estimate of the amount of equity you would be able to access from your home, so that you can have a complete understanding of all aspects of your loan. .
2. HUD Counseling
All prospective reverse mortgage applicants are required by law to participate in a counseling session with an independent, HUD-approved counselor. This service verifies that you have considered all of your financial alternatives and are comfortable with the terms of the reverse mortgage. By federal law, a counselor must review options other than a reverse mortgage with you. Some of the options include, but are not limited to, borrowing from family or friends, taking out a traditional mortgage with payments, generating income from the sale of your home, and other home equity conversion options that may be available
3. Processing
A processor will be assigned to your file. The processing agent will call you to let you know that we have received your application, and let you know if we need any other documents or information. Generally, there are no fees prior to closing; however, there may be circumstances that require the collection of fees prior to the appraisal. Your processor will alert you if this is the case. After receiving all pertinent information and data, the processor will finalize your loan with you (i.e., determine loan payout option) and submit the loan package for final approval. Your processor will go over all of the different options and you will decide which option best meets your needs. Generally, if there are no issues with your title, appraisal, inspection, etc., your loan should close within 2 - 3 weeks.
4. Appraisal
Next, an appraisal will be ordered with a third-party appraisal management company. They will contact an FHA-approved appraiser to inspect the interior and exterior of your property to establish your home's market value. The appraiser will verify that the physical condition of the property meets FHA guidelines. If any structural defects are found, in most cases, you will be required to hire a contractor to complete the repairs after the reverse mortgage closes. The appraiser will take some pictures of both the inside and outside of your home
5. Underwriting
Once all of the required documentation is obtained and submitted, the lender's underwriter reviews the loan file. The underwriter issues the loan approval with conditions, and once the conditions of the approval are met, your closing date will be scheduled.
6. Closing and Funding
On closing day, your consultant will answer any remaining questions you may have, and a licensed and bonded notary meets with you at your home to sign the loan documents. Should you change your mind after signing the documents, you have the right to cancel the loan during the three business days following the closing date. On the fifth business day after signing, your loan will fund, and you may collect the proceeds in the form of a direct deposit, pre-paid card or monthly checks.
7. Repayment
You will never make any monthly mortgage payments during the life of the loan. The loan is repaid when you cease to occupy the home as a principle residence. The loan may be repaid by you or the heirs/estate, with or without the sale of the home. You/they are protected from ever repaying more than your home is worth. The repayment obligation can never exceed the home's value or sale price.
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