Steps to Get a Reverse Mortgage
- Awareness & Education
Homeowner learns about reverse mortgages from a news article, advertisement, internet, word-of mouth, etc.
- Counseling
Homeowner seeks counseling from a HUD-approved counseling agency. Counseling is required for all reverse mortgages and may be conducted face-to-face or by telephone. By law, a counselor must review (i) options,
other than a reverse mortgage, that are available to the prospective borrower, including housing, social services, health and financial alternatives; (ii)
other home equity conversion options that are or may become available to the prospective borrower; (iii) the financial implications of entering into a reverse
mortgage; and, (iv) the tax consequences affecting the prospective borrower's eligibility under state or federal programs and the impact on the estate or
his or her heirs.
- Application/Disclosure
Homeowner fills out an application and a selects payment plan, whether fixed monthly payments,
lump sum payment, line of credit, or a combination of these. Lender discloses to homeowner the estimated total cost of the loan, as required by federal
and applicable state law. Homeowner provides lender with required information, including photo ID, verification of Social Security number, information
on any existing mortgage(s) on property, and counseling certificate.
- Processing
Lender orders an appraisal and the appraiser
makes sure the physical condition of the property meets FHA guidelines. If any structural defects are found, the homeowner must hire a contractor to
complete the repairs.
- Underwriting / Approval
Lloan parameters are finalized with the homeowner
(e.g., determining payment option, fixed or adjustable interest rate) and the loan package is submitted for final approval. It takes 2-5 days
to approve a loan application.
- Signing
An appointment is made with the homeowner for a notary to witness the signing of the final loan documents.
- Disbursement
After the rescission period, the reverse mortgage is created and funds are disbursed. Any existing debt on the home is paid off and a new lien is placed on the home. The homeowner may use the
loan proceeds for any purpose. During the life of the loan, the loan servicer disburses monthly payments to the homeowner, advances line of credit funds
upon request, collects any repayments on the line of credit, and sends monthly statements to the homeowner.
- Repayment
Homeowner is not required to make any principal or interest payments to lender during the life of the loan, but payments are allowed if the homeowner wants to make payments. There is NO PREPAYMENT penalty. The loan
is repaid when the homeowner ceases to occupy the home as a principal residence. The loan may be repaid by the homeowner or the heirs, with or
without a sale of the home. The repayment obligation can not exceed the value of the home.
Next: Frequently Asked Questions
