How To Apply for Reverse Mortgages

A Reverse Mortgage is a loan available for homeowners over the age of 62 against the equity of their home. It is different from traditional loans as you don’t need to make monthly payments to the lender. Instead the payment is reversed where the lender offers you payments (monthly, lump sum or line of credit) and you will have to pay it back only when you leave your house, due to illness or death.

Reverse mortgage has considerably higher origination fee. The Homeowner Equity Conversion Mortgage is the most popular type, approved by the Federal Housing Department (FHA).

Instructions

  • 1

    Initial process

    Learn more about reverse mortgages. Consult someone who has already pursued this type of loan and surf the net for further information. Reverse mortgages will take several months of understanding so contact a specialist and start the initial paper work. Getting hold of the reverse mortgage application will mean that you are now legally considering this option.  The application will indicate the relative fees you will incur, including interest rates and loan payments.

  • 2

    Counselling

    Before your application gets processed, make sure that you obtain a signed HECM Counselling Certificate, which will indicate that you have held counselling sessions with a certified HUD counsellor and gone through every detail about the loan and considered all alternate options. This is necessary, even though you have made up your mind.

  • 3

    Assessment

    Now choose a lender and start the assessment process. The FHA-approved person will establish a legal value of your home and conduct a thorough assessment, further verifying ownership, any previous liens, errors etc.  The process is usually referred as Underwriting, where the lender will complete all the necessary procedures before giving the green light for the application to be approved. Make sure that you disclose everything so that the process can be completed smoothly.

  • 4

    Close the deal

    Here the lender, applicant and a legal person will meet to sign the agreement and set a closing date. The homeowner or applicant must review the application one last time, checking for the fees and payments he will be making, and how he wishes to receive the funds (monthly, lump sum etc). Having signed the document, the applicant is entitled to cancel the deal within three days after the closing date.

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