Here is a look at
the steps of the Reverse Mortgage lending process. This will give you an idea
of what to expect.
Application
When you apply, you
will be asked to select a payment plan: a credit line, monthly advances (term
or tenure), or a combination of a credit line and monthly advances. You may
also be asked to select a monthly or annually adjustable interest rate, and to
decide if you want your property taxes and homeowner insurance paid directly by
advances from your loan. (Many lenders do not ask you to make all these
decisions until later in the process.)
You will need to
provide information required by the lender, including a photo ID, verification
of your Social Security number, a copy of the deed to your home, information on
any existing debt (liens) on your home, and your counseling certificate. You
will also be asked to pay a loan application fee, which covers the cost of a
home appraisal and a minimal credit check.
Processing
Your lender orders
an appraisal, title search and insurance, lien payoffs, and any other services
needed to complete the loan. An appraiser comes to your home to assess its
value and physical condition. If the appraiser finds structural defects that
require repair, you must hire a contractor to make the repairs before you can
qualify for the loan.
Your lender submits
all required information to the lender’s underwriting department, which
determines if everything needed to close the loan is correctly completed.
Closing
When your loan is approved
by the underwriting department, a date for closing the loan is set, and the
final loan documents are prepared. A closing is a meeting where you sign all
the loan documents. It is generally handled by the title company or the lender.
Some states require you to retain an attorney to be present at closing.
After closing, you
have 3 business days in which to cancel the loan. When this three-day period is
over, loan funds can be paid to you, and can be used to pay off any existing
debt on your home. A new lien is placed on your home to secure the reverse
mortgage. Your loan is then sent to the servicing department, or to another
company that specializes in servicing reverse mortgages.
After Closing
Unless you have
arranged to have your taxes and homeowner insurance paid directly from your
loan proceeds, you are still responsible for making these payments. If you do
not, the lender can use loan proceeds to make the payments or, if none remain,
the lender can make the entire loan due and payable.
The loan servicer
sends you your loan advances and periodic loan statements. No repayment is due
until the death or permanent move from the home by the last living borrower,
the sale of the home, or anything else that results in the home no longer being
the principal residence of at least one borrower. The repayment obligation
cannot be greater than the home’s value at the time the loan is repaid.