When a person applies for a reverse mortgage, he or she can expect the process to take from 4-6 weeks. There are a handful of steps involved, but the one which takes up the greatest amount of time involves educating one’s self on the process and making the decision to pursue it.
Applicants typically take up to six full months to research reverse mortgage loans. They search for information online and then seek out local resources and meet with specialists. During this time, the home owner takes the time to review all documents and estimates pertaining to their choices. Once the decision to pursue has been made, the application and approval process begins.
5 Steps to receiving a Reverse Mortgage
1. The Application Process
Once a homeowner has applied for a reverse mortgage loan, the loan institution will have legal permission to start processing it. There will be be any charges applied on the initial process. The borrower’s application will clearly reveal all fees that are involved, as well as the amount loaned and the interest rates on the loan.
2. The Counseling Process
This second step has necessary fees. Borrowers are required to receive counseling from an agency that is approved by HUD. The agency will then provide an HECM certificate of completion. Most areas allow borrowers to receive the counseling before they apply or after they have begun an application.
3. The Appraisal Process
Before approving a reverse mortgage, the lender must know the legal value of the applicant’s property. In order to determine the legal value of the involved property, a full appraisal must be done. Applicants must be sure to use an appraiser that is FHA approved. The appraisal will follow the formatting set in place by FHA. Appraisals from those who have not been approved by the FHA and have not followed the correct formatting for reverse mortgages are not accepted. All property must be appraised using the FHA guidelines.
4. The Underwriting Process
The underwriting process involves establishing the property’s legal ownership, working through any liens, bankruptcy, trouble with trusts, and similar issues. To determine the applicant’s legal ownership, the reverse mortgage lender will perform a title search and then purchase insurance for the title. All financial issues will be addressed and solutions will be resolved during this time. When the underwriting and loan approval is done, the application status will be cleared and the applicant will be given a date for the closing.
5. The Closing process
Once a closing date has been discussed and decided, the applicant meets with an attorney or official notary. Upon the homeowner’s review and acknowledgements, the applicant will sign the application. Although the applicant has agreed and signed for the reverse mortgage, there will be a waiting period of three days. The right of rescission time allows applicants to change their minds and cancel on a reverse mortgage.
When the right of rescission period is done, the applicant will receive full payment from the title company. If the homeowner has a current mortgage, this will be paid off and the money that is left will be sent to the applicant. The payment process is fast and the money is paid out within a few days.