The 5-step reverse mortgage process
If you’re retired or nearing your retirement, we understand that you’d like to tread carefully. Perhaps you’ve already planned for your life ahead. However, several changes have taken place across the globe concerning life expectancy, economy, and the rising expenses for day-to-day survival.
With these sudden changes, it is natural to be low on funds. So how do you get out of this situation and guarantee yourself a comfortable retired life? Well, a reverse mortgage may be the ideal option to secure your future.
So, here is the 5-step reverse mortgage process for you to live a happy, worry-free life.
1. Assess Your Current Finances
Potential borrowers need to analyze their current financial status. If you’re looking to liquidate your home equity, you need to keep track of your monthly expenditure and weigh out your options.
A reverse mortgage is a costly method. You need to be sure of your finances so that you won’t face any problems while paying taxes, insurance premiums, etc. If you have any existing financial problems, you should evaluate whether a reverse mortgage will benefit you or burden you.
Moreover, if you do not want to give up your home for a reverse mortgage, you can even downsize to an apartment. However, downsizing will also require you to undergo a tiring process, including packing, relocating, listing, and selling.
Once you check your options and decide that a reverse mortgage is the best option for you, we move on to the next step: the paperwork.
2. Managing Paperwork
The reverse mortgage process has an organized filing process. You need to file an application and provide the necessary documentation to start the application process. This process takes about 45 days from the start to the end.
You need to be a minimum of 62 years old as well as have sufficient home equity. The FHA looks at your property value, existing mortgage debts, interest rates, etc. before qualifying you for a reverse mortgage.
You are required to send in documents such as a photo ID, tax bill and mortgage statements, as well as your Social Security Card along with your main application.
3. Attend Counseling
You need to attend a counseling session at a HUD-approved center to understand the impact of a reverse mortgage on your life and your finances. These counselors will help you decide whether a reverse mortgage is an ideal option for you. Moreover, they will help you with the loan allocation process if you decide to go ahead with it.
These sessions are generally paid and held over a phone call. You need a completion certificate to proceed to the next step.
4. Know Your Equity Value
You need to know how much your property is worth. This helps in analyzing the amount a reverse mortgage loan will provide you. Another benefit of thorough analysis is that you will guarantee that your property meets the FHA standards. Furthermore, appraisals are completed by studying the value of your property compared to others sold in your neighborhood.
5. Process, Close, Receive
You can choose a Home Equity Line of Credit (HELOC) or a HECM Saver if you wish to have lower closing costs as well as no monthly payments. If you want to liquidate more cash against your home equity, you can opt for a HECM Standard.
You can receive payments as lump-sum amounts, monthly payments, as well as in other ways. Once a borrower matches the lending requirements, they are eligible to sign the final reverse mortgage loan documents.
Reverse mortgages are beneficial financial tools but should be opted for with caution. The actual process may seem complicated, but if you follow all the steps we mentioned carefully, we’re sure you will complete the loan process seamlessly.