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Table of Contents
- What is A Reverse Mortgage?
- Who Gets A Reverse Mortgage?
- What’s the Difference Between a Reverse Mortgage and an equity loan or HELOC?
- How Does HUD Determine How Much I Can Get?
- What is HUD’s Involvement in a Reverse Mortgage?
- Payment Options & Disbursement Limits
- Reverse Mortgage Terms You Should Know
- 3 day right of Rescission
- Amortization Schedule
- Affidavit of Heirship
- Appraisal Management Company (also called AMC)
- Asset Dissipation
- Case Number
- Community Property
- Conditions (Underwriting)
- Condo Approval
- Counseling Agency and Counseling Certificate
- Deferral Period
- Financial Assessment
- Good Faith Estimate
- HUD1 Settlement Statement
- Initial Mortgage Insurance Premium (IMIP) and Mortgage Insurance Premium (MIP) Renewal
- Interest Rates
- Lender Credit
- Life Expectancy Set Aside
- Mandatory Obligations
- Non-Borrowing Spouse (Eligible and Ineligible)
- Promissory Note/Deed of Trust/Mortgage/Loan Agreement
- Power of Attorney
- Principal Limit/Principal Limit Factor
- Primary Residence
- Repair Set Aside
- Residual Income
- Short to Close
- Solar Power – Uniform Commercial Code UCC Filing; Leases.
- Total Annual Loan Cost (TALC)
- Trusts (Trustor, Trustee, Beneficiary)
- Third Party Closing Costs
- Verification of Funds and Seasoning of Funds
- The Mortgage Process
- Shopping for a Loan
- Do your HUD Counseling as Soon as You Make the Decision to Get the Loan
- Work an Application Process That Suits You
- Close Your Loan
- Watch “What is a Reverse Mortgage & How Does it Work” – Video Explanation by ARLO™
What is A Reverse Mortgage?
A reverse mortgage is a loan. It is not a government grant. You are not selling your home to the bank and you are still on title to the property. Just like any other loan, you are still responsible for the payment of your taxes and insurance but unlike other loans, with a reverse mortgage, borrowers are not required to make regular payments of principal and interest or interest only for as long as you live in the home as your primary residence.
The reason it is called a “reverse mortgage” is because it operates in reverse of a traditional or forward loan. Rather than making monthly payments and the balance going down each month with each payment, borrowers are not required to make any monthly mortgage payments and the balance rises as the interest accrues and is added to the outstanding loan balance. While no payments are ever required on the loan, borrowers may make a payment at any time in any amount if they so desire.
Who Gets A Reverse Mortgage?
Reverse mortgages are available to borrowers age 62 and over for the government insured Home Equity Conversion Mortgage (HECM) and some proprietary or private programs will accept borrowers down to age 60. While eligible spouses under the age of 62 can be covered by the terms of the loan, they are not actually borrowers on the HECM reverse mortgage.
Eligible non-borrowing spouses who were deemed as such at the time the loan is closed are allowed to remain in the home under the terms of the original mortgage for life, even if the borrowing spouse passes but since they are not a borrower on the loan, do not have the ability to access any money still in the line of credit so all non-borrowing couples should review their circumstances to see if it makes sense for them to refinance the loan in the name of both spouses as soon as each reaches the minimum age for the loan eligibility.
What’s the Difference Between a Reverse Mortgage and an equity loan or HELOC?
The reverse mortgage has greater flexibility than any other loan currently being offered. It also requires that borrowers pay FHA (HUD) mortgage insurance on the HECM program. A HELOC or Home Equity Line of Credit is a bank product that is relatively inexpensive and quick to obtain. However, like most loans, there is a tougher standard to qualify for the loan underwriting and it is not as friendly for seniors on a fixed budget.
Borrowers must qualify for a HELOC with traditional income and debt ratios that often require them to make monthly payments of at least interest only early in the term of the loan and then may increase up to three times the amount of the early payment to include principal payments as well later in the loan during the repayment period.
It is at this time that the lender may no longer allow borrowers to take additional draws from the line of credit and as is the case with senior borrowers especially, their income may have decreased from the time they originally obtained the loan making it even harder to repay it in the remaining term. The lender can also freeze, lower the amount available or close the HELOC at any time according to their own discretion.
The reverse mortgage is also available as a line of credit, but the line is guaranteed by HUD. The lender cannot lower or close it at will. In fact, the line of credit grows on the unused portion monthly and borrowers can receive more funds available later when needed rather than less at the lender’s discretion.
Since the loan is insured, if anything were ever to happen to the lender, the loan would be assigned to a new lender or HUD and the loan would remain in effect as written.
- How a Reverse Mortgage is Smarter than a HELOC.
- HECM vs HELOC Comparison: Which is Best for You? (2021)
How Does HUD Determine How Much I Can Get?
On a forward mortgage, you apply for a loan amount and the lender may approve that amount or a lower amount depending on your circumstances (income, assets, credit scores, etc.). With a reverse mortgage, HUD uses a calculation to determine the borrowers’ benefit or loan amount based on several criteria which include the borrowers’ age(s), the interest rate as expressed by an “expected rate” (more about that later), and the property value or the HUD maximum lending limit, whichever is less.
Because the borrower is never required to make a mortgage payment while living in the home, the older the borrower is, the more money the calculation will allow as a percentage of the value of the home. After all, since the loan allows the borrower to make no periodic payments and the interest is accruing, it stands to reason a 62-year-old borrower can accrue more interest in a lifetime than an 87-year-old borrower.
HUD’s calculations take this into account using actuarial tables for life expectancies. And it would also be true that a loan at 4% can accrue more interest than a loan at 3% so the calculator would also take these differences into account. (You can download a copy of these tables here.) Finally, HUD has a maximum lending limit they use to limit their risk that is currently $822,375.
This does not mean that you cannot get a reverse mortgage on a home valued over $822,375, but you stop receiving additional benefits at this limit. The same age borrower with a home worth $822,375 would receive the same benefit or loan as a borrower with a home valued at $900,000. If the home is worth considerably more than HUD’s maximum, the proprietary programs (often also referred to as Jumbo Reverse Mortgages) are sometimes a better fit for those borrowers.
So, since this appears to be a “moving target” with interest rates, ages and HUD changing guidelines involved, what is the best way to determine your eligible amount of available funds? Visit our online calculator which is free, requires very little information and no obligation to see how much you could expect to receive from the loan for your circumstances.
What is HUD’s Involvement in a Reverse Mortgage?
There are two parties involved in every mortgage transaction – a lender and a borrower. That is also true with a reverse mortgage. But in addition to a reverse mortgage lender, the government is involved in every transaction because HUD will insure the loan and so there are steps the lender must follow to be certain that the loan meets HUD requirements. To be a lender for a HECM loan, the lender must be approved by HUD.
That does not mean though that the originator is necessarily a HUD-approved entity. Some originators, like mortgage loan brokers, are not HUD-approved but must take the loan to a HUD-approved lender to be underwritten and closed. The loan is the same HUD HECM loan either way, but there may be additional or higher costs with more people in the mix.
Borrowers are encouraged to be good shoppers and compare different lenders. Not all lenders are priced well and not all brokers are priced higher, but it is prudent to compare. After all, if you are getting the same loan with the same parameters and the same insurance no matter where you go, you might as well get the best terms for yourself and your family. HUD is involved in every loan completed no matter who the originator is.
HUD will require every borrower to attend counseling with a HUD-Approved counselor. They will assign a HUD Case Number that will control the origination of the loan. The appraisal cannot be completed until it is delivered from the appraiser to the HUD EAD (Electronic Appraisal Delivery) Portal at which time HUD reviews each appraisal and determines if another appraisal will be required.
In fact, lenders may not give approvals to borrowers under the terms of the program until after they have received appraisal clearance through the HUD EAD. Then the lender will deliver certain documents to HUD for insuring the loan after the loan closes.
Each set of legal documents that borrowers sign states that the lender may call the loan due and payable if HUD does not insure the loan within 9 months, so it is very important that if your lender contacts you and requests something needed for insurance that you assist them (and another document in the package that you sign says you agree to do so).
Payment Options & Disbursement Limits
Lump Sum Payment
The borrower chooses to take all the funds at closing in one lump sum draw. This is mostly used with purchase transactions when all the funds are needed to buy the home.
Line of Credit
This is the most common option wherein the borrower can take a draw up to their maximum available amount but can also choose any other amount as well and leave the remaining funds in a line of credit to be used as they desire.
A Tenure payment is a payment for life. The HUD calculator determines the payment amount you receive based on your value, age, and interest rate.
The borrower chooses the amount of the payment they want rather than letting the calculator make the decision based on the amount to be paid for life. They payment might only last for a few years in this choice but that might be all the borrower needs until another income stream kicks in.
The modified option is when you combine any of the options above. I.e., you choose to set part of the line aside for use as a line of credit for repairs but then use the rest of the line for a tenure payment.
Initial Disbursement Limit
HUD limits the amount that any borrower can take in the first 12 months based on their mandatory obligations. If you are not repaying qualified existing liens on the property or using the loan to purchase the home, you are limited to 60% of the Principal Limit in the first 12 months and then you can receive the remaining 40% of your proceeds any time after 12 months. However, the fixed rate loan program is a single draw option.
Therefore, if you choose the fixed rate program and your initial disbursement limit gives you less money at the close, you can never draw the remainder of the funds as you can after 12 months with the adjustable-rate line of credit program.
Reverse Mortgage Terms You Should Know
Reverse mortgages use a lot of the same terms that forward mortgages also use. But there are some terms that are exclusive to reverse mortgages that you may not have been exposed to and we want to help by defining some of the more often used terms. This list is not all-encompassing but will give you a very good start on understanding the more common reverse mortgage terms you may hear used during a transaction.
3 day right of Rescission
All refinance transactions must follow the Federal law permitting a 3 day right to rescind (or cancel). Even after a borrower has signed their final loan documents the loan cannot fund until this mandated rescission period has elapsed. If a borrower rescinds during this 3-day period, the Lender must cancel the loan.
The amortization schedule is an estimate given to each borrower that shows how interest and mortgage insurance is likely to accrue on your reverse mortgage loan over the life of the loan. Unless you are getting a full draw at the close of the loan and have a fixed rate reverse mortgage, this schedule is just an estimate though because it cannot consider any future draws you may want to take or interest rate changes. Use this for comparison purposes only.
Affidavit of Heirship
This is the document used by administrators and title companies to determine ownership of real property in the case of a deceased relative, especially if the property was not specified in the decedent’s will. This is often required in states with strong heirship laws (i.e., Texas).
Appraisal Management Company (also called AMC)
This is a company that employs the appraiser to evaluate your home. The AMC hires the appraiser, and, in this manner, the lender has no direct conflict or pressure on the appraiser and can remain compliant with HUD and federal Appraiser Independence Laws by allowing the appraiser to appraise the home free from any possible pressure from anyone associated with the loan transaction as required by law.
HUD allows lenders to use the dissipation of cash assets in the bank to count toward income to qualify borrowers when underwriting the loan. HUD has a formula the lender uses to determine how much of the borrowers’ assets can be used as annual income based on their age(s) and that amount may be added to their other income and used to qualify borrowers for the loan.
HUD assigns a case number to each property when the borrower is beginning a new FHA loan. Lenders use the Case Number for several purposes and that number runs with the property even if the borrower chooses a new lender.
Property held jointly by married individuals or acquired by either spouse while married are generally considered community property.
Your loan must be underwritten by an FHA-approved underwriter with a “DE” (Direct Endorsement) qualification. That underwriter will determine anything not present in the loan file that is needed to close the loan and those items become “conditions” to close. You must satisfy the underwriting conditions to receive your loan documents and close your loan.
Property located in a condominium project must be approved by HUD to be eligible for the HUD HECM program. The project must either already appear on HUD’s list of approved projects or the documentation must be submitted to obtain project approval, or the lender cannot close a loan in that project (some exceptions do apply – speak to your lender about your project).
Counseling Agency and Counseling Certificate
The counseling agency is a third party that is approved by HUD to provide education to borrowers about the reverse mortgage that comes from an educator and not a lender. Once a borrower has completed the counseling session and has demonstrated a general understanding of the loan program, the counselor will give the borrower(s) a Counseling Certificate indicating successful completion of the session. A lender cannot get the HUD Case Number to proceed without this certificate number.
Reverse mortgages are due and payable when the last borrower on the loan passes or permanently leaves the property. In the case of eligible non-borrowing spouses though, they are given a deferral period if the borrower passes before the non-borrowing spouse and can remain in the home for as long as they live under the same terms as a borrower (must pay the taxes, insurance and any other property charges as due and must live in the home as their primary residence).
It is important to note that a non-borrowing spouse does not have access to any funds in the line of credit during the deferral period.
In 2014 HUD implemented Financial Assessment guidelines that spelled out how reverse mortgage borrowers must qualify for reverse mortgages. Those guidelines include credit requirements, and income and debt requirements. HUD’s guidelines do not use debt to income ratios and credit scores are not considered but rather you will see terms like residual income, family size and asset dissipation used.
Good Faith Estimate
The Good Faith Estimate or GFE is the estimate of all settlement charges. This will be one of the disclosures you will see in your counseling session as well as one of the forms that the lender should provide you at the time they send you a loan application package.
Remember that when you receive a proposal, lenders often use various versions of different forms but once it gets to application, they must just the federally approved forms and all charges and fees must be clearly shown. Be sure to compare all fees and charges on each estimate.
HUD is the Department of Housing and Urban Development and FHA is a division of HUD, the Federal Housing Administration. People use HUD and FHA interchangeably when talking about the reverse mortgage program because it is a HUD program that is operated by FHA.
HUD1 Settlement Statement
The final closing statement that outlines all the details of your transaction including all fees and charges is the HUD1 Settlement Statement.
Initial Mortgage Insurance Premium (IMIP) and Mortgage Insurance Premium (MIP) Renewal
With every HUD/FHA insured loan, borrowers have both an initial mortgage insurance premium and an annual renewal. The insurance premiums are not paid out of pocket but they are paid from the loan proceeds initially and then accrued on the renewals. The initial premium is 2% of the maximum claim amount which is the lower of the value or the HUD maximum lending limit (currently $822,375). The renewal is .50% of the outstanding balance of the loan.
People are often confused by all the rates they hear quoted with reverse mortgages, especially on the lines of credit programs. There is the initial rate, the expected rate, the capped rate, and an index rate and a margin. The index is the instrument used to set the basis for the rate that is out of the lender’s control.
The LIBOR is no longer being used and is being replaced with the SOFR (Secured Overnight Financing Rate) but borrowers still see mostly Constant Maturity Treasuries as of this writing. To this rate a Margin is added. Lenders cannot control what the Index will do in the future and most will be about the same in the long run so borrowers should pay attention to the Margin as this will determine the ultimate interest rate that is charged for as long as the loan is in existence.
The initial rate is the rate that is the combination of the index plus the margin for the first period of the loan. Whether that is for one month on a monthly loan, three months or one year that rate may change as soon as the initial period is over. The expected rate is one that is not charged to the borrower.
It is determined by using a longer and higher index and HUD uses this only to determine how much money borrowers will receive on their reverse mortgage loan. Interest rate caps are the preset limits that kick in and keep the interest rate from rising above certain levels.
When marketing and HUD guidelines allow, lenders may be able to pay some or all of the borrower’s costs on some loans. The lenders must disclose when they are paying fees for the borrower on their behalf in the form of lender’s credits.
In other words, they must show the actual charges incurred and then show that they paid those charges for the borrower. Federal disclosure laws do not allow lenders to simply exclude the charges from the transaction.
Life Expectancy Set Aside
The HUD financial assessment guidelines require borrowers to meet certain guidelines for income, credit, and other considerations. However, if borrowers are not past a point where approval would be completely in the borrower’s worst interests, HUD will allow lenders to still approve borrowers in some cases by setting funds aside from the loan to pay Property Taxes and Homeowner’s Insurance.
These set aside funds are set aside for the youngest borrower’s life expectancy and are known as a LESA, a Life Expectancy Set Aside. They do result in borrowers receiving less money for discretionary purposes, but many borrowers like them. They do not accrue interest until used to pay taxes and insurance. There is no cost to the borrower for this service.
When determining how much money is available to borrowers at closing or in the first 12 months, HUD reviews the borrowers’ mandatory obligations which are the current eligible liens on the home, any property taxes that are due, insurance premiums and the costs to obtain the reverse mortgage. Eligible liens would be a current mortgage that was not a cash out transaction obtained in the last 12 months.
Non-Borrowing Spouse (Eligible and Ineligible)
An Eligible non-borrowing spouse is a spouse of an eligible borrower who lives in the subject property but is not an active borrower due to either age or other factors (credit, etc.). If the spouse passes while the eligible non-borrowing spouse is still living in the property, the loan goes into a deferral period and the non-borrowing spouse can remain in the home under terms of the loan (but does not have access to any remaining funds on the line of credit).
An ineligible non-borrowing spouse does not meet the HUD requirements (I.e., does not occupy the home) and therefore is not eligible for the deferral treatment in the case of the passing of the occupying spouse.
Promissory Note/Deed of Trust/Mortgage/Loan Agreement
These are the three legal documents that outline the transaction between the borrower and the lender. Lenders have no more rights than granted to them by borrowers in these documents and borrowers must adhere to their agreements, so these are important documents to read and understand.
The Promissory Note is the promise of the borrower to pay the lender for the money borrowed. It outlines the amount the borrower is borrowing and at what interest rate and when it is due for repayment to the lender.
There are two Notes and Two Deeds / Mortgages for every adjustable-rate reverse mortgage transaction-one to the lender and one to HUD in case HUD needs to step in and advance funds on behalf of the borrower. Fixed Rate reverse mortgages have just one note and one deed/mortgage.
The Deed of Trust or Mortgage (depending on which instrument is used in the state where the property is located) secures the loan. It is the instrument that is recorded and creates a lien on the property which allows the lender to foreclose on the loan with a borrower default.
This is the same right all lenders of forward loans have as well. You need to read the documents and understand what can create a default which includes not occupying the home as a primary residence, not paying your property taxes and insurance and the death of the last borrower on the loan.
The Loan Agreement outlines the overall reverse mortgage transaction, including advances, mortgage insurance and rights and obligations of both the borrower and the lender.
Power of Attorney
A Power of Attorney is a legal document that allows one person to act for another in some circumstances. It is important to note that HUD has very specific requirements for the use of a Power of Attorney depending on the reason for its use.
Principal Limit/Principal Limit Factor
The Principal Limit in a reverse mortgage is the loan amount that you will receive based on your age, interest rates, the maximum lending limit, and the property value. The Principal Limit Factor is the percentage of the value of the home or the maximum lending limit, whichever is less, that determines the Principal Limit you will receive based on the formula as set by HUD or the investor for the program in which you are interested.
Probate is the legal process of proving or verifying a will or giving the courts time to determine what to do with a deceased individual’s property/assets when there is no will. Often real estate must go through probate to avoid any claims of heirs or debtors later.
For the purposes of a reverse mortgage, your primary residence is one at which you live most of the year and at which you are legally registered to vote (if you are registered), where your bank accounts and other legal documents are directed, and where your legal identification labels your residence (i.e., your driver’s license). You must notify your lender if you plan to take extended leaves away from the home if you have a reverse mortgage on this property.
Repair Set Aside
A repair set aside occurs when the lender sets funds aside from your reverse mortgage to pay for repairs to your home that cannot be completed prior to the loan closing. They must be completed within 6 months and the lender will set aside 1.5 times the amount of the repair cost.
It is important to note that if you have a fixed rate loan, there is no second draw available so unlike the adjustable-rate options where you would have access to the unused repair set aside funds after all repairs are completed and paid, any funds not used on the fixed rate program are not available to borrowers (they are also not used and therefore unborrowed and not added to the balance owed).
Residual Income is the amount of money left over for use by the borrower(s) after all required debts are paid each month and the lender uses fourteen cents ($0.14) per square foot maintenance factor for each borrower for utility costs. An example of this is if a borrower’s home is 1500 square feet, the maintenance and utility factor is $210 per month and is added to all other debts (cars, credit cards, taxes, and insurance, etc.).
The total is subtracted from the borrower’s income and the amount left is the residual income and it must meet HUD requirements for the family size for the region where the home is located.
Short to Close
Short to close refers to the situation that the amount owed on the property combined with the closing costs exceed the Principal Limit (loan amount) that a borrower is eligible for on the reverse mortgage. A reverse mortgage can still be accomplished when someone is short to close if they can cover the difference with their own seasoned funds or a gift from a family member.
Solar Power – Uniform Commercial Code UCC Filing; Leases.
Borrowers who have solar power on their homes often have leases because they do not own the equipment. A lease is a lien on the property. The lease must be released to do a reverse mortgage, even though it can be re-recorded later.
Most solar companies will cooperate with borrowers wishing to get reverse mortgages but not all will, and you will need to check with your solar company to be certain. The companies will file a “UCC Filing” which is a notice of lien on your property that they will need to abandon so that the HUD mortgage has priority.
Again, they can refile after the reverse mortgage closes but not all companies will cooperate, and it is best to know if your company will before you spend money and time processing a loan and paying for an appraisal if your company will not.
Total Annual Loan Cost (TALC)
This is a disclosure used for reverse mortgages and not seen in forward loans. Because reverse mortgages are front loaded (the fees are charged at the start of the loan and added to the balance owed), reverse mortgages can be quite costly, especially if used for short-term financing.
The TALC shows borrowers the cost of financing over the years and borrowers can readily see the actual cost reducing over time as the initial cost is spread out. This may help you determine if the loan is right for your needs based on the amount of time you intend to keep the loan.
Trusts (Trustor, Trustee, Beneficiary)
A trust is a fiduciary arrangement established by a trustor that allows a third-party Trustee to hold assets on behalf of a beneficiary(ies). The trustor is also known as the donor party because they are the individual(s) who granted the assets to the trust. The third-party trustee can be anyone the trustor wishes, including themselves or family members (often for other family members).
When using a trust for a reverse mortgage, the trust must meet HUD requirements so the lender will have the trust reviewed by an attorney. If changes are required, most trusts can simply have an amendment drawn to correct any terms that violate HUD requirements at the borrowers’ and attorney’s review, approval, and draft of the same.
Third Party Closing Costs
A third-party cost refers to any costs in your reverse mortgage that are not charged by the lender or HUD. Lender costs are those that are charged by the lender and are paid to the lender and the lender has control over and receives that payment. HUD’s cost is the Mortgage Insurance Premium and that is payable directly to HUD.
Third party costs are charges from others such as title companies, appraisers, country recorders, etc. that are not lender fees and over which the lender has no control and does not receive those funds. In fact, the lender may not charge anything whatsoever above the actual cost of the charge from that third party. A line by line list of closing costs can be found here.
Verification of Funds and Seasoning of Funds
When cash assets must be used to close a loan transaction, those funds must be verified as being the borrowers and the borrower must be able to produce at least 3 bank statements showing they had the funds in their account with no large deposits.
This verifies that the borrower has the liquid assets and that the funds are “seasoned” in their account and not recently borrowed funds. HUD does not allow the use of unverified funds when needed for down payment or closing costs since that could indicate a new obligation that has not been considered in qualification criteria.
The Mortgage Process
Closing a reverse mortgage is very similar to getting a forward loan with a few very notable exceptions. Because the loan is a complex financial transaction, HUD, Lenders and State Laws have included some important safeguards for borrowers and it can lengthen the process at times.
Shopping for a Loan
How do you find the best deal for your circumstances? Do you just call the company based on a commercial you saw, a flyer you got in the mail or what?
For some borrowers, it is much easier than others because they are proficient using the internet and they have no problem shopping and comparing loan programs and costs. This is an extremely important step, and we advise borrowers to check online reviews and to get several proposals. Don’t look at just one or two items but review the whole deal.
For example, some companies have learned that they can artificially lower the cost of just one or two fees by a small amount and then raise rates or other fees that can cost borrowers tens of thousands of dollars in other areas.
Don’t settle for one company that charges a lower appraisal fee only to find out too late that you just incurred a margin or other costs that will mean literally thousands of dollars more in costs to you or your heirs.
Do your HUD Counseling as Soon as You Make the Decision to Get the Loan
Sometimes HUD counselors are easy to reach and book an appointment. Sometimes they are not. In some states, you can begin the loan as soon as you have your counseling certificate, in some states like California, there is a 7-day cooling off period after counseling that your lender cannot do anything on your loan. If you think you are going to get a reverse mortgage, book a counseling appointment with a HUD-approved counselor and complete the counseling session.
You need the certificate they will give you to proceed anyway and if you wait until you are ready to apply to get counseled, then you may have an additional waiting period that you will be forced to observe before you may proceed.
Also, the HUD counselor may bring up some information in the counseling session that allows you to know what additional questions you should ask your lender at or before application.
Work an Application Process That Suits You
The reverse mortgage application is a long application and requires many borrower signatures. One of the recent innovations though, is the ability for borrowers to use electronic signatures if they prefer rather than having to hand-sign every document. This allows a lender to send you a package over the email that you can receive, review and “click” for your acceptance but it does not replace your need to review the documents carefully.
Some borrowers find it easier because they can increase the size of the font (the letters) as large as needed to easily read. Some have a tougher time reading documents on the computer.
If you like reading the documents on the computer, electronic signatures are much easier and you can store the signed documents on the computer, print them if you wish in your home or ask the lender to send them to you if you do not have the ability to print a large package of loan documents.
If you cannot print and do not wish to sign electronically, be sure to let your lender know you still want an application package printed on paper for your review and signature. Sign all required signature lines and return all required documents to the lender (copies of your license, social security award letters, your homeowner’s insurance, etc.). Here is a hint, if you cannot take copies, you can take pictures with a smart phone and send them if you can get a clear picture of the entire document.
Once the lender receives your completed package, they will process your loan request which includes ordering your title review, order the appraisal and once completed, have the loan underwritten. When approved, your processor and Loan Officer will contact you to set up a loan closing.
Close Your Loan
Your processor will schedule a time to have a Notary visit you at your home or location of your choice where you can sign all your loan documents. Because the loan is considered a refinance transaction (unless you are using your reverse mortgage to purchase a property), there is a 3 day right of rescission required by law.
The right to rescind does not include the day you sign your loan documents or Sundays or Holidays so a 3-Day right to Rescind usually stretches to 4 – 5 days but this is true for all refinance transactions, not just reverse mortgages.
After the right of rescission period is over, the closing agent will wire your funds directly to your bank account for same day availability of funds (unless you chose to receive a check and then you would be subject to delivery times and funds availability based on your banks rules). We recommend you opt for the wire so that you have your money available that same day.
At All Reverse Mortgage, Inc, we know that getting a reverse mortgage can be a bit daunting at times. And while many of the steps or procedures are the same as any other home loan you are likely to have gone through in the past, some of the thing’s borrowers need to do for reverse mortgages are not like any other loan they have ever closed. And we know this is for several reasons.
In fact, anyone who has not closed a loan in the last 6 years might think any loan they worked with now seemed foreign even if it wasn’t a reverse mortgage with all the changes the industry has undergone with TRID (Tila-Respa Integrated Disclosures) that are not like anything anyone used before October of 2015 (a disclosure that is not used with reverse mortgages).
Lenders who close all or mostly forward loans have been using the TRID disclosures and not the disclosures used by reverse mortgage lenders for the past 6 years. We understand that many borrowers have never experienced lending like it is today because prior to just a few short years ago, it was never like this before. That is why borrowers need a company like All Reverse Mortgage when they are considering a reverse mortgage loan.
We do not originate any other loan programs. As our name implies, reverse mortgages are all we work with. You need a lender who has your best interests at heart and knows the loan program inside and out, not an originator who closes mostly forward loans and only one or two reverse mortgages a year. We invite you to review our BBB reviews or our Google reviews.
These are just a couple of review sites where lenders and others cannot “buy” a review and you can read the comments of actual customers. We hope you will find information like this fact sheet and the reviews at the agencies helpful and will decide that All Reverse is the right company to help you with your reverse mortgage needs.
Watch “What is a Reverse Mortgage & How Does it Work” – Video Explanation by ARLO™