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1. Reverse Mortgage Awareness
Homeowner learns about the Reverse Mortgage program.
2. Reverse Mortgage Action
If necessary, homeowner seeks additional information and documentation by contacting 1st Reverse Mortgage USA or a Reverse Mortgage loan officer, HUD, Fannie Mae, AARP, NCOA (National Counsel of Aging), or the National Center for Home Equity Conversion.
3. Reverse Mortgage Counseling
Homeowner seeks counseling from a local HUD-approved counseling agency, or a national counseling agency, such as AARP, National Foundation for Credit Counseling, or Money Management International. Counseling is required for all reverse mortgages and may be conducted face-to-face or by telephone.
By law, a counselor must review (i) options, other than a reverse mortgage, that are available to the prospective borrower, including housing, social services, health and financial alternatives; (ii) other home equity conversion options that are or may become available to the prospective borrower, such as property tax deferral programs; (iii) the financial implications of entering into a reverse mortgage; and, (iv) the tax consequences affecting the prospective borrower's eligibility under state or federal programs and the impact on the estate or his or her heirs.
4. Reverse Mortgage Application
Homeowner fills out loan application and selects payment option: fixed monthly payments, lump sum payment, line of credit, or a combination of these. Lender discloses to homeowner the estimated total cost of the loan, as required by the federal Truth in Lending Act. Lender collects money for home appraisal. Homeowner provides lender with required information, including photo ID, verification of Social Security number, copy of deed to home, information on any existing mortgage(s) on property, and counseling certificate.
5. Reverse Mortgage Processing
Reverse Mortgage Lender orders appraisal, title work, lien payoffs, etc. An appraiser comes to your home. The appraiser assigns a value to the home and determines the physical condition of the property. If the appraiser uncovers structural defects that require repair, the homeowner must hire a contractor to complete the repairs after the Reverse Mortgage closes.
6. Reverse Mortgage Closing
Following approval, closing (signing) of loan is scheduled. Closing papers and exact figures are prepared. Closing costs are normally financed as part of the loan.
7. Reverse Mortgage Disbursement
Homeowner has three business days after signing papers in which to cancel the loan. Upon expiration of this period, the loan funds are disbursed. Homeowner accesses the funds in the form of the payment option selected. Any existing debt on the home is paid off. A new lien is placed on the home. The homeowner may use the loan proceeds for any purpose. During the life of the loan, the loan "servicer" disburses monthly payments to the homeowner (if this option is chosen), advances line of credit funds upon request, collects any repayments on the line of credit, and sends periodic statements.