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Reverse Mortgage Checklist

An Outline of the Steps in the Reverse Mortgage Process

Securing a reverse mortgage is much easier than securing any other kind of mortgage, and the steps involved are much the same.  Our reverse mortgage checklist will walk you through the process and help you better understand what you need to do to tap into your home equity and spend the rest of your life without a mortgage payment.

Study the reverse mortgage program.

Knowledge is power.  Before you make any major financial decision, you should learn everything you can about the situation and the opportunity.  Gather as much reverse mortgage information as possible and make sure you understand how the loan works.  Click the link provided for a full explanation of the reverse mortgage program or visit the HUD’s helpful summary for additional information.

It’s wise to get advice from someone you trust.  Seek information about the details of the loan program from lenders or family and friends who have experience with reverse mortgages.  This is also a good time to analyze your budget and establish a financial plan for the future.

Meet with a qualified reverse mortgage counselor.

Counseling is a federally mandated step in the reverse mortgage process.  It is required for all reverse mortgage applicants.  During the counseling, your counselor will explain in detail the advantages and disadvantages of the reverse mortgage program and help you understand how this financial decision will impact your estate.

It’s helpful to know the goals of the reverse mortgage counseling process so that you can use the time you spend with your counselor as good as effectively as possible.  Ask any questions you may have.  This is the purpose of the counseling session.  When you leave, you should feel informed and confident of your decision.

When you’re ready to locate a counselor, use the HUD’s interactive form to find the nearest counselor in your area.

Find a reverse mortgage lender.

This part of the process will directly affect how much money you’re able to save.  Each lender you meet with will offer you different interest rates and closing cost arrangements and will charge you different fees.  Take the time to get quotes from multiple lenders in your area and pick the one who can offer the reverse mortgage that best meets your needs.

Start the application process.

The application process is simpler for a reverse mortgage than for any other kind of mortgage.  You don’t need to provide any credit information.  Your lender will research the title of your home and analyze any other mortgages tied to the property.  At this point, make sure your lender has provided you with a good faith estimate of the closing costs and origination fees connected to the loan.

Your application will move through the underwriting process once all necessary documents are in order.  After underwriting is complete, your lender will let you know whether you qualified for the loan or not.  This shouldn’t be an issue.  The vast majority of seniors who apply for reverse mortgages are able to qualify without any trouble.

In order to qualify, you must meet the following requirements.

• You must be at least 62 years old.
• You must own your home.
• You must live in the home.  You can’t take out a reverse mortgage on a vacation home or an investment property.

Attend the closing and receive your funds.

At the closing table, you’ll sign all the necessary contracts and other paperwork to formally receive the loan.  This is where you’ll pay any lender fees or closing costs that you owe.  The lender will make arrangements to provide you with either the first month’s payment or the entire lump sum payment.  You’ll typically need to wait at least three days before you receive the funds.

Apply the money as needed.

You can select whether you want to receive the payment as a lump sum or in monthly installments.  Many seniors elect to receive the money from their home equity on a monthly basis in conjunction with other residual sources of income such as investments and Social Security.  This provides these seniors with a stable source of continual income.

Another major benefit that takes effect during this stage of the process is the elimination of all other mortgage debt.  If you have a current mortgage on your home, funds from the reverse mortgage will be used to pay off this loan first.  This means you’ll never have to make a mortgage payment again.

You can use this funding to pay for medical expenses, home improvements, vacations, college tuition for your children or grandchildren, living expenses, or anything else.  It’s your money.  There are no restrictions on how you apply it.  If you have other questions, find answers on our reverse mortgage FAQ sheet.

Don’t worry about repayment.

A reverse mortgage is a loan, but it’s not one that you’ll likely have to repay directly yourself.  Even if your home equity becomes completely depleted, the bank does not take over ownership of your home and you can continue to live there until you pass away and leave the home to your heirs.

You will have to repay the full reverse mortgage amount to the bank if you decide to move into a new home.  When you pass away, your heirs will be responsible for paying back the reverse mortgage.  Most of the time, your heirs will choose to sell your home in order to gain the necessary funds to pay off the loan.  Any additional equity obtained through the sale goes to your 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 you owe more than the home is worth.  This gives you assurance that your heirs won’t be stuck with even one cent of extraneous debt beyond the value of the home.

The reverse mortgage is a unique and specialized loan type that allows many seniors to benefit financially from the ownership of their own homes.  Read through the linked materials and resources provided here or contact a lender to learn more.

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