Reverse Mortgage Process Steps
Understanding the steps in the reverse mortgage lending process can be essential to your financial success when you apply for a reverse mortgage. It’s important to know what’s coming up and what to expect so you can make the right decisions for your financial future and the future of your estate. A thorough understanding provides added peace of mind that you’re making good choices when it comes to promoting financial stability.
If you’re considering a reverse mortgage and you have questions or wish to get started, call Consolidated Credit today at 1-800-435-2261 to speak with a HUD-certified housing counselor for free with no obligation. We can help you better understand the reverse mortgage lending process and help you get started once you’re ready.
Step 1: APPLICATION
When you apply, you may be asked to select a payment plan: a credit line, monthly advances (term or tenure), or a combination of a credit line and monthly advances. You may also be asked to select a monthly or annually adjustable interest rate, and to decide if you want your property taxes and homeowner insurance paid directly by advances from your loan. Some or all of these questions may not be asked until later in the process, depending on the lender you choose.
You will need to provide any information required by the lender, including: a photo ID, verification of your Social Security number, a copy of the deed to your home, information on any existing debt (liens) on your home, and your reverse mortgage counseling certificate. You will also be asked to pay a loan application fee, which covers the cost of a home appraisal and a minimal credit check.
Step 2: PROCESSING
Your lender will order an appraisal, title search and insurance, lien payoffs and any other services needed to complete the loan. An appraiser will come to your home to assess its value and physical condition. If the appraiser finds structural defects that require repair, you must hire a contractor to make the repairs before you can qualify for the loan.
Your lender will submit all required information to their underwriting department, which will determine if everything needed to close the loan is correctly completed.
Step 3: CLOSING
When your loan is approved by the underwriting department, a date for closing the loan will be set, and the final loan documents will be prepared. The closing is a meeting where you sign all of your loan documents. It is generally handled by the title company or the lender. Some states require you to retain an attorney to be present at closing.
After closing, you have 3 business days in which you can cancel the loan. When this three-day period is over, loan funds can be paid to you, and can be used to pay off any existing debt on your home. A new lien is placed on your home to secure the reverse mortgage. Your loan is then sent to the servicing department, or to another company that specializes in servicing reverse mortgages.
Step 4: AFTER CLOSING
Unless you have arranged to have your taxes and homeowner’s insurance paid directly from your loan proceeds, you will still be responsible for making these payments. If you do not, the lender can use loan proceeds to make the payments or, if none remain, the lender can make the entire loan due and payable.
The loan servicer will send you your loan advances and periodic loan statements. No repayment will be due until the death or permanent move from the home by the last living borrower, the sale of the home, or anything else that results in the home no longer being the principal residence of at least one borrower. The repayment obligation cannot be greater than the home’s value at the time the loan is repaid.