Reverse Mortgage Basics: The Loan Process
The perception of obtaining a mortgage loan is like handing your car over to the mechanic and waiting anxiously in the waiting room for the dreaded news to be delivered. "That'll be $$$$!" Part of the dread is that you have limited knowledge on cars and you can't see step by step what the mechanic is doing. Well, let's remove the veil and allow you to take a look under the hood of the reverse mortgage loan process.
The first step is awareness and education of the reverse mortgage loan, which is now easily attainable either through the TV, radio, or your own research. We recommend meeting with a qualified reverse mortgage professional who has a vast amount of experience and knowledge with reverse mortgages. This is where you learn about specific numbers, what you qualify for, and receive an analysis of your particular situation. Why go to someone who doesn't specialize in this product and has maybe never put one together? It's like going to your primary care doctor for heart surgery, when there are cardiac surgeons available.
Once you have decided that a reverse mortgage is right for you, then you can either begin the application process and/or the required counseling session. Your reverse mortgage professional will prepare the loan application which will cover the financial aspects previously discussed as well as all the required disclosures. The application can be completed either in person at your home or at our office or by phone. A complete copy is left behind for your further review with your trusted advisors or family members. The counseling session can also be done either in person or over the phone. Typically there is a fee that is paid by the borrower to an independent third-party, HUD-approved counseling agency. Once completed, you will receive two certificates; one to keep and the other for your lender.
Now that you have completed counseling and an application, your lender is able to begin the processing of your paperwork and complete the financial assessment on your file. This includes a review of each applicant's credit history, property tax payments and other credit factors that will be evaluated to measure a borrower's willingness and financial capacity to meet the ongoing obligations of the loan. In addition, this process includes a review of your title report and checking the balance of any liens/mortgage to be paid. Upon satisfying these requirements, you are now able to move on to the appraisal.
Over 90% of the reverse mortgages today require a full FHA appraisal (with the exception of the jumbo reverse mortgage). The appraiser will determine the value of your home based on what comparable properties in your neighborhood have sold for recently. The lender will arrange for the appraiser to contact you to schedule the inspection. The appraisal is typically paid by the borrower.
Once the appraisal report is complete, your file will be forwarded to the loan underwriter for final approval and your reverse mortgage professional and staff will work to satisfy any conditions/requirements needed to close the loan.
Lastly, a clear to close is issued once final approval has been granted, and this is the time to review the numbers once again and make your election on how you would like to receive your loan proceeds (lump sum, payment plan and/or line of credit). The closing can take place at the lender's office or right at your home with a mobile notary. Once you've signed the closing documents you have three business days to cancel the loan if you should chose to do so. After the cancellation (rescission) period has passed the transaction is recorded and your funds are disbursed based on the payment option you chose at closing.
And there you have it, the reverse mortgage loan process from beginning to end. Check back for more reverse mortgage basics topics.
For more information on reverse mortgages and other related topics contact:
Certified Reverse Mortgage Professional (CRMP)
NMLS# 473353
Toll Free (877) 500-0454
Local (702) 460-6222
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