The application process for a reverse mortgage generally takes about 30-45 days from start to finish and has six major steps. However, the longest part of the reverse mortgage process is often the decision-making process that leads up to the application. Homeowner(s) may research reverse mortgages for several months, and consulting a trusted financial advisor is highly encouraged.
EDUCATION AND RESEARCH PHASE
Step 1. Determine Eligibility
- Borrower’s home must be a single-family residence, a two-to-four unit* owner-occupied house, a HUD-approved condominium or a manufactured home that meets FHA requirements.
- At least one homeowner must be age 62 or above.
- The home must be their principal residence.
Step 2. Request a Housing Wealth Illustration
The Housing Wealth Institute developed a special software program to model Housing Wealth options. After all, a picture is worth a thousand words! Advisors who work with Don can request a complimentary, customized Illustration. Here are two samples: stay in home or purchase a home. To learn more about the Housing Wealth Illustrator, please contact us here.
Step 3. Schedule a Consultation
In addition to his work with the Housing Wealth Institute and the American College (adjunct instructor), Don serves as a consultant and trainer for Retirement Funding Solutions—a subsidiary of Mutual of Omaha Bank. Here he focuses on training 200+ loan consultants across the country on incorporating Housing Wealth (reverse mortgages) with retirement income principals. As a part of his role, Don can connect advisors with the correct consultant to meet your needs.
This is the process your clients would experience.
Step 1. Reverse Mortgage Counseling
Before securing a reverse mortgage, you are required to receive independent counseling from a certified, HUD-approved counselor. This is a great safeguard built into the process, ensuring that you receive all the facts from an independent advisor. Counseling can usually be done over the phone and generally takes around 60 minutes.
Step 2. Application
Your loan consultant will help you fill out the application. The application is nonbinding, which means you can withdraw at any time. You will receive a complete copy of the documents for your review.
Step 3. Financial Assessment
To help ensure the long-term success of your loan over time, HUD requires 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 capacity to meet the ongoing obligations of the loan.
Step 4. Appraisal
The appraisal establishes the legal value of the applicant’s property. The reverse mortgage appraisal must be conducted by an independent HUD-approved appraiser (not all appraisers have this approval) and it must follow specific HUD guidelines. This means that even if a homeowner already has an appraisal, it will most likely have to be re-appraised.
Step 5. Processing and Approval
After the application your reverse mortgage will enter the processing stage. The underwriting process is where all documents are reviewed, finalized and prepared for closing. Your loan consultant will let you know if any additional documentation is required in this step.
Step 6. Closing and Receiving Your Funds
The lender can close the loan in the comfort of your own home by coming to you with the required documents to sign. Even after signing the closing documents, you still have three business days to cancel the loan if you so choose. Following the right of rescission period, the title company will issue a check or wire the funds to the borrower’s account. If the applicant was using the reverse mortgage proceeds to pay off an existing mortgage, the title company will also send the mortgage payoff amount to the lender.
You will never have to make another monthly mortgage payment for as long as you occupy your home as your primary residence and remain current on property taxes, homeowner’s insurance, the costs of home maintenance, and any HOA fees.
After the application and funding process is complete, HUD mandates the loan be passed to the servicer. Even if the lending company retains the servicing, the loan consultant who worked with the clients during the application and origination phases will not be the same person servicing their loan.
The servicer is the company clients will need to contact should they have any questions or need information on their reverse mortgage. The servicer will also ask the client to certify on an annual basis that they are living in the property and maintaining the property. Additionally, the servicer may remind clients of their property-related expenses—property taxes, insurance payments, and HOA fees. However, these expenses are ultimately the clients’ responsibility.
The servicer may not be the same company throughout the life of the loan. However, FHA insures the loan, making the guarantee to your clients that no matter what happens to their servicer, they will always have access to the funds shown in their loan documents.