The steps needed in getting a reverse mortgage are not complicated. But they each are very important:
Step #1: Initial Consultation
The first conversation with a mortgage lender should include calculating the loan amount, evaluation of the various available loan programs, and identify the cash-out or cash-access options. Discussions of total closing costs and loan qualifications should happen at this time, as well.
Step #2: HUD/FHA Counseling
A loan application for a HECM cannot occur until loan counseling has been done. There are dozens and dozens of different companies, local and national, who are authorized to offer this class. It can be done in person or over the phone, covers everything one could ever need or want to know about reverse mortgages, typically taked 60 to 90 minutes, and usually costs between $125 and $175.
Your mortgage lender can refer you multiple different options in your area, none of which have a connection with any mortgage company.
Step #3: Loan Application
This step is identical to every other kind of mortgage and includes providing all required asset, debt, and income disclosures and documentation. Even though there is no payment required on a reverse mortgage, there are still income requirements, as the lender has to show that the borrower still has sufficient income to pay their home and living expenses.
Step #4: Processing and Underwriting
Processing loan application occurs when the lender evaluates all the supplied documents and prepares them for submission to the underwriter. The requirements for a HECM are very straightforward and are exactly the same for every lender – the processor checks, double-checks, and then checks again to make sure nothing is incorrect, missing, or out of order.
Then the underwriter goes over everything again, in order to make certain that the loan application meets or exceeds are the various guidelines. If successfully approved, the loan is then ready for closing. If not, it’s very common that there will be additional requests for more documentation or clarification on what has already been provided.
Step #5: Funding and Closing
After the loan is approved, loan documents will be drawn-up for signature. Once signed, the escrow company will request funds from the lender, pay off the existing mortgage and any loan-related expenses, and forward funds to the borrower.
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