Reverse Mortgage Process – In Steps
The reverse mortgage process generally takes a a month or two to complete from start to finish. Of course, certain situations can cause the process to move slower, but barring any unforeseen complications, your reverse mortgage may go through within 30-60 days.
In this post we’ve laid out the typical steps involved in obtaining a reverse mortgage. If you have any questions, or would like to learn more about any of these steps in greater detail, don’t hesitate to contact an experienced reverse mortgage professional serving your area.
A Step-By-Step Overview of the Reverse Mortgage Process
STEP 1: Research
The borrower begins gathering information on Reverse Mortgages to determine if it’s a good fit for his or her needs. If you’re reading this, you’ve already made the first step!
STEP 2: Counseling
The borrower completes the mandatory counseling that is required for Reverse Mortgage approval. The counseling process is relatively quick, lasting about 90 minutes on average. Very few states require face-to-face counseling, which is why many borrowers choose to complete the counseling session over the phone. However, even in a state that requires in-person counseling, the sessions rarely last more than a couple of hours.
Keep in mind that the counseling session may only be good for six months. So if the borrower does not apply for the loan before the six month period is up, they may have to do another counseling session once they’re ready to apply.
STEP 3: Application
The borrower completes his or her Reverse Mortgage application and determines how they wish to receive the loan proceeds: lump sum, monthly payments, line of credit, or a combination of these.
STEP 4: Processing, Appraisal and Underwriting.
It may take a few business days before the loan application package is compiled by loan officer and/or processor and submitted to underwriting. Most borrowers will be able to set up the appraisal within the first week or two, unless there is something unusual going on like a holiday or there is a high volume of business. During the appraisal, the appraiser will assess the borrower’s home and determine its current market value.After the appraiser visits the home, it may take a several days for the lender to receive the appraiser’s final appraisal results. The loan underwriting continues and a conditional approval may be issued. Any required conditions are gathered by the loan officer or mortgage processor. The conditions are submitted back to the underwriter for final verification and approval, the loan file is assigned to a closer, and the final loan documents will start being issued.
STEP 5: Closing and Disbursement
The reverse mortgage loan documents are sent to a title company, closing attorney, and/or authorized agent (depending upon the State). After your loan is approved and all documentation is submitted, a final signing is scheduled and your funds are disbursed in accordance with your payment choice.
(Refinancing Only) STEP 6: Recession Period
In the case of a refinance, there is a 3 business day (including Saturdays) rescission period in which the borrower(s) can look over everything and if they change their mind(s), they can rescind (cancel) the loan. With purchases, there is no rescission period.
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Potential Benefits of Reverse Mortgages**:
- No monthly payments and no repayment is required until all borrowers are no longer using their property as their primary residence, all parties on the deed pass away, or they fail to pay their property taxes and homeowners insurance.
- Tax free monthly income*
- Payments can be used for whatever the borrower wants, including home renovations, consolidating debt, paying for medical expenses and insurance costs, and traveling and other leisure activities
- Reverse mortgages provide a tool that allows seniors to tap into the equity they have in their homes. There are no income or minimum credit score qualifications. In today’s tightening credit markets, reverse mortgage products may be one of the best solutions available to most retired homeowners.
- Possibly the greatest benefit of all, reverse mortgage programs may help seniorsremain in their homes that they have worked so hard to pay for throughout their lives.
- A reverse mortgage is what we call a non-recourse loan. This means that with a reverse mortgage you are not personally liable. The liability is only to the extent of the value of your home at time of sale, death or vacating the premises as your permanent residence. You are not liable nor are your heirs personally liable; they can either sell the home at time of your death or keep the home and pay off the remaining balance of the reverse mortgage.
Talk to a reverse mortgage professional to learn more about some of the benefits of reverse mortgages and to see if one is right for your financial needs.
- Be sure to check out our page which weighs a reverse mortgage versus a traditional home equity line of credit (HELOC).
- Also, learn how borrowers can use funds for a reverse mortgage to help pay for assisted living and/or nursing home care.
Related Topic: So, there are no monthly payment obligations? Not exactly.
*Consult a financial tax professional for details.
**Loan benefits and parameters are subject to change. Consult with a mortgage professional for up-to-date information.
Learn more about how people are using home equity conversion mortgages for purchasing homes:
Please keep in mind that the reverse mortgage industry is constantly changing and some of the information contained on this site may not be current. Please ask a licensed reverse mortgage professional for up-to-date guidelines.
