Learn the steps from beginning to end on how to get a reverse mortgage.
Reverse Mortgage Process: Start to Finish
Know what to expect through the process. Go from research to funding of a reverse mortgage loan. After reading this brief how-to, you will be equipped with each of the steps you need to take. All of these steps are necessary to making the best possible decision toward financial freedom during your retirement! Once you have familiarized yourself with this process, come back to this link to be connected to the top reverse mortgage lenders in the business.
- Hearing About a Reverse Mortgage Loan--Maybe is was a T.V. commercial, a radio ad, or a friend. Maybe it was a long time ago or today. However, whenever, you've made it to step one. You're curious and need information. You have come to the right place. Everything you need to get started is right here.
- Knowing the Bare Bones--(Age and Homeownership) Would the youngest applicant (you or maybe a spouse) be at least 62 years old? If the youngest homeowner on the loan is not at least 62, you're going to have to wait. Do you own the home free and clear, or have a significant amount of equity? It is OK to have a mortgage on your house, but you would need a good amount of equity to qualify for a reverse mortgage.
- What About Your Credit and Income?--Something is causing you to doubt your eligibility because maybe you've been turned down for a mortgage for some reason. Know this; you do not need good credit. You do not need income to qualify. You don't need to have a certain amount of money in the bank. A reverse mortgage isn't like a traditional mortgage. You may qualify on your age and the appraisal of the property.
- Knowing Your Property--Besides your age, the major qualification for a reverse mortgage loan is the property you own. You must live there, no exceptions. In fact, you must remain living there for the life of the loan. Your property will be appraised and must meet minimum standards. Any major structural repairs will have to be addressed. If your home is manufactured, a condo, off the grid, or unique in some way (one of those dome homes from the seventies, perhaps), you may have problems with a property approval..
- Seeking Professional Help--If you've made it passed the first four steps, you really need a professional from here out. A good place to start is with an advocacy group that represents seniors. Maybe you already have a relationship with a group. If not, here are a couple of good ones that have been around a long time. The American Association of Retired Persons (AARP) has a lot of information on their Website about reverse mortgages. The U.S. Department of Housing and Urban Development (HUD) guarantees more than 90% of reverse mortgages and HUD's Website is a must to visit. And of course, you MUST have a good lender. There are a lot lenders out there. Make sure you are working with the absolute best in the business. We have compiled the best for you here.
- Counseling--A reverse mortgage loan requires counseling. You cannot fund your loan without it. Before your loan can go to a lender's underwriter, you will need to produce a certificate stating that you have seen a HUD approved counselor. To find a counselor near you, go to HUD's Counseling Agency Listings or call (800) 569-4287.
- Exploring Other Options--Both the reverse mortgage lender and the HUD approved counselor should tell you that a reverse mortgage is a sophisticated lending tool and other options to such a loan need to be explored as well. Reverse mortgages can be expensive compared to other loans. The interest rates charged are normally adjustable but fixed rates are available. Consider what else you might do beside taking a reverse mortgage before you apply: such as selling and downsizing your home, taking in a boarder, applying for social services, etc.
- Application Process--Fast forward a little now. You've identified your reverse mortgage lender, you've been through counseling, and your home has been appraised. The lender has gone over the payment options available to you, such as, a lump sum payment, regular monthly payments, or a line of credit to use at will. Once your application package is complete, it will go to the lender's underwriter. Final underwriter approval can take several weeks. Ask the lender how long you can expect to wait until you know your loan proceeds are forthcoming.
- Funding Your Reverse Mortgage Loan--Once the underwriter's conditions are all satisfied, your loan application will move to a loan closing department. At this point, the final loan paperwork that you sign with a notary will be prepared. There will likely be a lot of paperwork, including the reverse mortgage note and deed of trust. If possible, get a complete copy of the papers at least the day before your appointment. That way you can take your time reading everything before you go sit with the notary officer for the official signing.
- Living With Your Reverse Mortgage - Your loan has funded and any mortgage you used to pay monthly has been paid off in full. Now, you DO NOT make a monthly mortgage payment. Instead, you receive money from the equity in your home according to the payment plan you and your lender chose. As long as you live in the house, you will not need to repay the loan. Only when you move out, sell the home, or pass away, will the loan need to be repaid.
Renee Morgan has been a loan officer for over eighteen years. She is also a freelance writer and guest expert for radio and TV.