Our licensed experts put their best foot forward to ensure a remarkable experience throughout your entire process. Their in-depth expertise and knowledge of reverse mortgage processes allow you to make smart choices. Experience the comfort of no monthly mortgage through a reverse mortgage. Here’s everything you need to know about our process.
The entire reverse mortgage application process typically takes a total of about 30-45 days right from the day that the processing starts and it has only five main steps. The most extended aspect of the reverse mortgage process is the time frame of decision-making that would lead up to the application.
Homeowners would typically go through materials on reverse mortgages that they can find on the internet in order to get acquainted and ensure that they are getting the best possible deal. Of course, they would also find out how to apply for a reverse mortgage.
Sequel to this, they would typically consult a local reverse mortgage consultant to get more clarification. A month or two may then pass with the homeowner meeting up with the consultant and scrutinizing the good faith estimate as well as other reverse mortgage documents.
The process begins with a brief phone call during which the borrower will be asked to provide some information for the initial application such as their date of birth, address, and mortgage statement information. Using this information, the loan officer assesses the borrower’s eligibility and walks them through their potential loan options. This initial application is not a binding document, meaning the borrower has the ability to cancel at any point in the process.
To ensure that the borrower is well equipped to make informed decisions regarding the financing of their home, Home Equity Conversion Mortgage (HECM) counseling is required for all applicants. An uninterested third party agency approved by the Department of Housing and Urban Development (HUD) is responsible for counseling. Lenders typically provide a list of recommended counselors to their prospective applicants; however, applicants are permitted to use any counseling service they wish, as long as they are HUD approved. The applicant is responsible for any counseling fees and is valid for 6 months.
These counseling sessions are typically conducted over the phone and last about an hour. Throughout the session, the counselor asks questions, provides information and answers any questions the borrower may have regarding HECM. The goal of the session is to ensure that the client is a good candidate for a reverse mortgage and ensure they are entering the reverse mortgage process with full disclosure. The third party counselor provides guidance, keeping the borrower’s finances in their best interest.
Once counseling had been completed, a notary would be dispatched to the home of the borrower to assist in signing the counseling certification as well as the initial documentation. For this step, your reverse mortgage consultant would provide a list comprising all the documentation that you would be needing as well as set a time to complete the application. The notary, when they visit would request for copies of these documents. Here is a list of the documents that would typically be required for this process:
Once the signed application, counseling certificate and supporting documents have been received, the lender is permitted to move forward in ordering the appraisal. The appraisal provides an updated value of the applicant’s property and aids in determining the size of the loan.
For a reverse mortgage, the appraisal must be completed by an Federal Housing Administration (FHA) approved appraiser and carried out using a sales comparable approach. If the borrower has had an appraisal in the past, it typically does not meet the guidelines specific to a reverse mortgage. For this reason, an updated appraisal is generally required. The borrower may or may not be responsible for any appraisal related charges. The sales comparable approach considers the sale price of comparable homes in a 1 mile radius which have sold within the past 6 months. If no suitable comparable sales can be found, the range and time frame will increase until a comparable is found.
In regards to the appraisal, actual improvements can add value to the home; however, these improvements should not be confused with maintenance work. Updated kitchens or bathrooms fall under actual improvements and can be reason for a higher appraisal value. On the other hand, a new roof, water heater, or landscaping are considered maintenance and do not add value to the home.
To distinguish actual improvements from maintenance and provide an accurate appraisal, the appraiser is required to enter the home, inspect every room in the home and take pictures for further review. Public records aid the appraiser in considering additional structures or upgrades that may require county/city permits.
After the receipt of the appraisal report, the underwriter reviews the entire loan file from a credit risk standpoint; looking for red flags such as uncertainty in regards to trusts or the title, outstanding liens, and credit history. If anything strikes them as a potential issue, the underwriter will work with the borrower to clear these uncertainties. Typically a letter of explanation from the borrower is sufficient action to settle these issues. Additional documentation may be required in some extenuating circumstances. This process usually takes about 1-5 days. Once the underwriter has verified that all information is updated and accurate, the final closing date can be set.
It is important to note that updated payoff will not equal the monthly statement because the interest has been accruing.
Once the loan is clear to close, a notary will be sent to the borrower’s home again to assist in the signing of the closing documents. This visit gives the borrower a final opportunity to review the closing documents and make sure that the loan amount, fees and interest rates line up with their agreed upon amounts.
Upon, this visit the notary will typically only request a proof of identity from the borrower. Some states do require a witness to be present during this process.
Once the borrower has signed the closing documents, there will be a three day rescission period during which the borrower has the ability to cancel with no penalty. On the fourth day, the loan is recorded with the county and funds are released to the borrower.
At South River Mortgage, nation’s #1 Reverse Mortgage Broker, we usually close a reverse mortgage at your home in 30 days or less when it is an ideal no-problem loan.
In real life, however, most applications have several problems that increase the required time significantly. Usually, the problems occur with POA, Conservatorships, Trusts, non-borrowing and non-occupying individuals on the title, private liens, and a long list of property issues including reverse mortgage on condos, manufactured homes, rural properties, repairs, etc. Any problems with these documents result in a delay in the originator’s and processor’s part.
A good loan originator will take time to address all the problems and educate the borrowers so it becomes easier to facilitate the process.
As we go through the application and process, our borrowers recognize the time we put into helping them with their reverse mortgage. We hope this outline helps you understand the process involved with a reverse mortgage. Still need help? Contact us today if you have any specific questions.
© South River Mortgage, All Rights Reserved NMLS#1854524 1750 Forest Drive Suite #195, Annapolis, MD 21401. These materials are not from HUD or FHA and were not approved by HUD or a government agency.
