Taking out a reverse mortgage often serves retirees as a beneficial way of tapping into their home equity to assist with their senior finances. But as with any type of new mortgage or refinance, there are several steps you must take before receiving those funds from the lender. Learn the ins and outs…of applying for a reverse mortgage so you know what to expect and ensure a quick and easy approval process.
Meeting the Basic Mortgage Application Qualifications
While every lender has different requirements during the underwriting process, there are several basic qualifications that every government insured “HECM” reverse mortgage applicant must meet. First, you and everyone else in title must be at least 62 years old and either completely own your home, or have substantial equity. The property must either be a single family home or a building with up to four units, one of which is occupied by the borrower. Some manufactured homes, condos and townhouses qualify as well. Although you’ll receive monthly payments from the lender once your mortgage application is approved and loan closed, you still must be able to pay for property tax and homeowners insurance. Once you know you meet these basic parameters, it’s time to contact a lender like iReverse Home Loans to further discuss not only if you may qualify for a reverse mortgage, but also whether it’s appropriate and suitable for your individual financial scenario.
Recent Reverse Mortgage Guideline Changes
Recent changes in the HECM reverse mortgage program now require applicants to show their ability to pay for housing obligations such as taxes, insurance and any association fees. In addition, lenders are now required to review your credit profile to determine if you have shown a willingness to meet your obligations. Together these two new criteria are referred to as a Financial Assessment. Your reverse mortgage specialist will review these items with you to further determine your eligibility.
Applying for a Reverse Mortgage
Before submitting your reverse mortgage application, borrowers are required by federal law to complete a counseling session approved by the U.S. Department of Housing and Urban Development (HUD) and submit a Home Equity Conversion Mortgage Counseling Certificate. This step simply ensures that you understand precisely how a reverse mortgage works and how it will affect your senior finances. The counselor will review and discuss your finances, current health status, desired lifestyle, and other factors to determine if a reverse mortgage is right for you.
After this step, the application process is very similar to any other mortgage. You’ll submit an application providing the lender with your financial and credit information. Then an appraiser visits your home to determine the market value and your corresponding equity. The lender will process your application to gather everything necessary and required by the program guidelines. Once these steps are completed, your application goes to underwriting to confirm your eligibility, review all documentation and issue an approval. Finally, your application goes to closing where you would sign the loan documents. You could then immediately begin to receive those funds to supplement your senior finances.
Choosing Your Payment Plan
One part of the reverse mortgage loan process that differs from any other mortgage application you’ve gone through is choosing your payment plan. While the most common options are to receive funds through a line of credit or single lump sum, it’s best to analyze each choice to determine which one best suits your senior financial needs. Payment plan choices include regular fixed monthly payments, a lump sum at closing, line of credit to use as needed or a combination of these. The right choice largely depends on your financial situation and spending goals.
Working with a certified reverse mortgage lender like iReverse Home Loans helps take out the anxiety of moving towards a new phase of your life. Find out how we’ve helped other seniors like you by reading a few of our client testimonials.