Reverse Mortgage Refinance - A simple Guide
If you have already chosen reverse mortgage as your trusted
partner in the mortgage
refinance jungle it's a good time to explore in details the
steps involved in securing reverse mortgage. Our simple little
guide details the steps involved in getting a reverse mortgage.
Be prepared and the entire process will go much smoother.
1. AWARENESS
Homeowner learns about the reverse mortgage program from a news
article, advertisement, word-of mouth, etc.
2. ACTION
If necessary, homeowner seeks additional information by
contacting a reverse mortgage lender or the National Reverse
Mortgage Lenders Association.
3. COUNSELING
Homeowner seeks counseling from a HUD-approved counseling
agency, or AARP-trained telephone counselor. Counseling is
mandatory regardless of which reverse mortgage product you
choose. Counseling is usually conducted face-to-face, unless you
use an AARP counselor. The counselor provides supplemental
information on reverse mortgages, determines whether you're
eligible to get a reverse mortgage, and discusses other options
that may be available to assist with your daily living. The
homeowner will be given a certificate to give to the lender as
proof they were counseled.
4. APPLICATION / DISCLOSURE
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. PROCESSING
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. UNDERWRITING
After receiving all pertinent information and data, lender
finalizes loan parameters with homeowner (i.e., determining
payment option, frequency of loan interest rate adjustments) and
submits loan package to underwriting department for final
approval. Currently, it can take anywhere from 4-8 weeks
(sometimes sooner) to complete the underwriting of a loan
package.
7. CLOSING
If the loan package is approved, closing (signing) of loan is
scheduled. Initial and expected interest rates are calculated.
Closing papers and final figures are prepared. Closing costs are
normally financed as part of the loan. Lender or Title Company
has homeowner sign loan papers.
8. 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 "service provider" 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.
9. REPAYMENT
Homeowner does not make any monthly mortgage payments to lender
during the life of the loan. The loan is repaid when the
homeowner ceases to occupy the home as a principal residence.
The loan may be repaid by the homeowner or the heirs/estate,
with or without a sale of the home. The repayment obligation
can't exceed the home's value or sales price.
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