Once you confirm that you’re eligible for a reverse mortgage, follow these steps to select and apply for a reverse mortgage.
Step 1: Research Lenders and Loan Availability
Educate yourself on types of reverse mortgages. The National Reverse Mortgage Lenders Association (NRMLA) offers guides to help you with this process. A reverse mortgage professional can explain the terms, benefits, and costs of each type of reverse mortgage.
Step 2: Select a Lender and Loan Officer.
Select a lender and loan officer that are experienced in reverse mortgages. It will be their duty to evaluate your needs and help find the best loan program to meet them. Don’t be afraid to ask questions and clarify the details of your loan. A detailed option report is ideal.
Step 3: Review Application, Fees, and Disclosures
You’ll provide some personal information so your originator can determine if you’re eligible for a reverse mortgage.
Your originator will explain the application, the fees involved with your loan type, and any disclosures. You will choose how you want to receive your funds, either in a lump-sum payment, line of credit, fixed monthly payments, or a combination.
Step 4: Attend Reverse Mortgage Counseling (HECM Loans)
Counseling is required for all Home Equity Conversion Mortgage HECM loans. However, we recommend counseling for any type of reverse mortgage. Counseling can take place in person or over the phone. The session typically lasts for 90 minutes. Lenders are not permitted to direct you to a specific counselor or agency. Rather, they are required by HUD to provide you with a list of approved counselors.
Step 5: Submit for Loan Processing
Once you’ve received the certificate proving that you’ve been through the counseling process, you can sign the loan application. The loan officer moves your file to processing where the appraisal and title are ordered. The borrower pays for the appraisal. After the loan officer receives the appraisal, your application is sent to the loan underwriter. The underwriter reviews the application and determines whether to approve it. This process can take a few days to several weeks, depending upon the area.
Step 6: Close on the Loan
Once your loan application is approved, closing is scheduled with a title agent or attorney (depending upon the state). The originator will confirm your payment choice. Final figures and closing documents are prepared. Lien payoffs are made.
Closing costs are normally financed as part of the loan (except for the counseling fee), but you have the option to pay them in lieu of financing. This process can take a few business days. Closing agents should not pressure you to close within a certain time frame. At this stage, you may still change your mind.
Step 7: Receive Fund Disbursement
After you’ve signed your reverse mortgage loan, as with any other refinance, you have three business days to cancel your loan. This is known as the “Right of Rescission” period. Once they’ve passed, your funds are disbursed in the form you chose. You may change your payment plan at any time by requesting a new payment plan agreement from your servicer, which may include a service charge of no more than $20.
Step 8: Work with Loan Servicing
After your loan closes, a loan servicer will manage your account. The servicer will disburse your monthly funds and will alert you if there are any tax or insurance issues with your loan.
In the right situation, a reverse mortgage can be a useful financial tool. Before embarking on any major financial decision, it’s always wise to consult with a finance professional.