The application process for a reverse mortgage generally takes about 4 to 6 weeks. The steps involved are below.
Step 1. Reverse Mortgage Counseling
Counseling is required for all borrowers on title of the property, prior to completing an application with a reverse mortgage lender (this does not imply that you can not contact a lender first, they simply can not take your application until you complete the required counseling). Because the counseling agency will review loan cost you should consider getting a quote from a lender prior to scheduling your session. This way you can review the actual quoted fees as opposed to estimates from the counselor.
If you desire counseling agencies will allow your loved ones or advisers to participate in the session as well.
In most states you can complete your counseling session over the phone. Once you complete the counseling session your reverse mortgage counselor will issue a certificate certifying that you have completed the counseling session.
Step 2. Completing The Reverse Mortgage Application
By completing the application you are legally authorizes the lender to begin the application process. Don’t worry it’s not binding should you change your mind. You can cancel the application at any point in the process. Even if you complete the loan you have 3 days after final settlement to cancel. As part of the application you will receive a list of reverse mortgage fees, interest rates, and loan amounts.
Step 3. Appraisal
Once your reverse mortgage application is processed the lender will order an appraisal. HUD requires that the lender order the appraisal. So, even if the homeowner has received an appraisal that they ordered on their own another lender-requested appraisal will need to be conducted. The appraisal will establish the legal value that the lender must use. It will be conducted by an FHA approved appraiser.
Step 4. Processing and Underwriting
Processing of your loan has actually already begun (that’s how your appraisal got ordered). During processing a processor makes sure all your documents are signed, you id’s are present, orders a title search, confirms your homeowners insurance policy, and get’s all the ducks in a row to hand off the application to a reverse mortgage underwriter.
Once a borrowers application has completed this process a final closing date can be set and your lender will contact you and let you know your loan is “clear to close”.
Step 5. Closing
At the final closing the lender and the borrower set a closing date where a notary or attorney meets with the borrower to sign the final loan documents.
At the closing is your opportunity to review the closing documents to make sure that the interest rate, fees, and loan amounts are the expected amounts.
After you sign you now enter what is called a 3-day “right of rescission” period. During this time although the closing has taken place, the borrower(s) can still cancel the application with no penalty for three business days after the closing.
Once the 3-day period is complete the title company will payoff any mortgages or liens against the property and issue remaining funds to the borrower.