Our reverse mortgage checklist will walk seniors through the reverse mortgage process to help them better understand how they can tap into their home equity without dealing with mortgage payments.
Here are the required steps:
Before making any major financial decisions, learn everything you can about your financial options and read up on reverse mortgage information as possible and make sure you fully understand the details of how the loan works. Remember, before applying for a reverse mortgage you should analyze your budget and establish a financial plan for the future.
Visit the HUD’s helpful summary for additional information.
Reverse mortgage counseling with a HUD qualified counselor is a federally mandated step in acquiring a reverse mortgage. Reverse mortgage counseling will eliminate any confusion over the unusual guidelines of reverse mortgages.
During the meeting, your counselor will detail the advantages and disadvantages of the reverse mortgage program to help you understand the impact of your decision.
Each lender will offer different interest rates, closing cost arrangements, and fees, so it is critically important to evaluate a few and compare loan terms. Taking the time to get multiple quotes from different lenders could make all the difference and is highly recommended for all loan transactions.
Seniors needn’t provide any credit information, as their lender will do the research for your home and analyze any other mortgages tied to the property.
At this point in the process, make sure that your lender provides you with a good faith estimate of the closing costs and origination fees connected to the loan. Once the necessary documents are in order, your reverse mortgage application will move to the underwriting process. Following underwriting, your lender will tell you whether or not you qualify for the loan.
This shouldn’t be an issue, as the vast majority of seniors who apply for reverse mortgages qualify without any trouble unless there's a question about having enough equity in the property.
To qualify, you must meet the following reverse mortgage qualifications.
Fully understand the reverse mortgage process, regarding:
Be aware of both the advantages and disadvantages of reverse mortgages:
I have considered all of the alternatives to a reverse mortgage, including:
Understand that reverse mortgages conflict with the following government aid programs:
Discuss your decision to secure a reverse mortgage with my heirs, who will be responsible for either:
Understand the terms dictating when the loan is due:
Recognize the potential consequences of noncompliance:
At the time of closing, you will sign and verify all of the necessary contracts and paperwork to officially receive the loan. At this point, you will need to pay all of the lender fees and closing costs that you may owe. Additionally, the lender will make arrangements to provide you with either the first month’s payment or the entire lump sum payment, depending on your preference. Typically, seniors will need to wait at least three days before receiving the loan funds.
At this stage of the process, seniors will eliminate all other mortgage debt – one of the major benefits of reverse mortgages. If you have a current mortgage on your home, funds from the reverse mortgage must be used to pay off this loan first along with any liens or judgements against the property.
While a reverse mortgage is technically still a loan, seniors will not be obliged to directly repay the loan. Even if home equity becomes completely depleted, the bank does not take ownership over the home; borrowers may continue to live there until they pass away and leave the home to heirs.
However, if borrowers decide to move into a new home, they will be required to repay the full reverse mortgage amount to the bank.
Additionally, when a borrower with a reverse mortgage passes away, their heirs will be responsible for paying back the mortgage. Typically, heirs choose to instead sell the home to gain the necessary funds to pay off the loan, while any additional equity obtained through the sale will go directly to the heirs.
Federal regulations mandate that the loan amount due can never exceed the value of the home itself, even if the property decreases in value and the borrower owes more than the home is worth. Essentially, this provides some comfort for seniors, as heirs cannot be responsible for any extraneous debt beyond the value of the home.
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