So, What is the Process of Obtaining a Reverse Mortgage?
Let’s Play Ball!
You had the initial chat with a Colorado Reverse Mortgage professional about your situation and you’ve decided to begin the process. So now you want to know about the process and how does a reverse mortgage work throughout the next few weeks.
1. TALK WITH US, GO TO COUNSELING AND SIGN AN APPLICATION PACKAGE (1ST BASE)
Your Colorado Reverse Mortgage expert reviews your circumstances in great detail to help you decide (based on your lifestyle, your needs and your retirement goals) which program suits you best. We will expand your knowledge base and provide you with numbers, charts and details reference materials specifically prepared for you. Then, armed with a solid understanding of the program and accurate numbers, you are ready for the HUD required counseling session!
The U.S. Department of Housing and Urban Development (HUD) requires that all applicants receive third-party counseling to explain the available options and details of a Reverse Mortgage. We will provide you a current list of counselors available for you to choose from. Typically, you pay a fee (regulated by HUD) to a non-profit organization. The counseling session typically takes about an hour, but at the end you will be issued a Certificate. This important Certificate needs to be emailed to Colorado Reverse Mortgage. A list of counselors and more information can be found here.
Colorado Reverse Mortgage will complete an application package with you; it only takes about 10 minutes. We then schedule an appointment to get your signatures on the completed package. At that time, we also would like copies of your:
- Signed Counseling Certification
- Valid State issued ID or Driver’s License
- Social Security Card (other documents can be used as a supplement)
- This year’s Social Security and Pension “Awards Letters”
- Any Bank Statements where SS income and Pension income are auto-deposited (all pages required)
- Most recent mortgage statement(s), if any
- Your Homeowner’s Insurance Agent’s contact information or Insurance Declarations Page
- Your old Title Insurance Policy
- Other items may be needed on a case-by-case basis, but a more thorough list can be found HERE.
After signing the application package, we are ready for the next step.
2. TITLE WORK AND THE APPRAISAL INSPECTION (2ND BASE)
The next step after you sign the application package is that we contract a Title Company to do the title search and create the binder. You can choose a Title Company for us to work with or with your permission we’ll choose one. Title Insurance is regulated by the State, so the fees charged by them are very similar. Having an Escrow Officer that understands the unique reverse mortgage paperwork will make for a smooth closing.
*If you have concerns or are aware of issues on the title or issues an appraiser may have, you should inform us of your concerns before we place these orders so that they can be addressed prior to these expenses being incurred. Often times, your concerns really are not problems at all and by discussing them upfront, you can alleviate any anxiety.
At the same time, we place the order for the home to be inspected and appraised. For the appraisal, you will pay an Appraisal Management Company (or AMC). This AMC will assign an FHA Certified Appraiser to inspect and place a market value on your property. Appraisals are collected for upfront with either a check or credit card. Depending on the location of your home and other factors, you may pay more, but in Colorado a typical appraisal costs about $650. Due to the market, type of construction, property size, location or other difficulty, the appraisal cost may be higher. On your behalf, we will place the appraisal request in to the required AMC system. An FHA licensed, independent appraiser will be assigned by the AMC. This appraiser will call you to schedule a time and date to inspect, measure and take photos and notes of your home. The mortgage companies and loan officers have little or no communication with the appraiser.
NOTICE: On October 2, 2018, FHA implemented an Appraisal Review rule. Once the appraisal has been completed and the file submitted to the Underwriter, the appraisal is then forwarded to FHA. At that point FHA could require a second appraisal (at your expense) to be completed. This occurs about 20% of the time and neither you nor your lender nor the underwriter have any control over this requirement. Between the two appraisals, the lower value must be used for the application process.
The reason for this possible second appraisal requirement is that FHA has found that some lenders (nationally) were still influencing the appraisers and getting “inflated values”. We at Colorado Reverse are disappointed with the behavior of these marginal lenders and appraisers. This practice is clearly unethical and now the entire industry and senior community is paying the price because of a few bad apples.
(Colorado Reverse Mortgage does not earn a fee, set the prices or get a choice as to which appraiser is assigned to your home. If you choose to or are not qualified for the approval, the expense of the appraisal(s) is (are) non-refundable.)
3. UNDERWRITING AND CLOSING (3RD BASE)
After the appraisal and title work is complete, Colorado Reverse Mortgage moves the loan into the underwriting department where all the documents are reviewed and finalized. The Underwriter has the final say as to the home value used to calculate the Loan.
We will then typically be given a “Conditional Approval”. On this document, outstanding conditions will be listed. The majority of these conditions will be satisfied by Colorado Reverse Mortgage internally and without needing your assistance. Occasionally, we will need your help to resolve some conditions that we simply cannot satisfy without your input.
Sometimes, the Underwriter will require either a “desk” or “field” review of the original appraisal. These reviews are required at their discretion and are used to verify that the original appraisal they were presented with is acceptable. There is no additional cost if the Underwriter requires this 2nd look. (This is not the same as what is discussed above with FHA’s requirement.)
Once we have satisfied the Underwriter’s Conditions, we are issued the “Clear to Close” and it’s time for Closing! From the time Colorado Reverse Mortgage received the Counseling Certificate to the date of Closing, on average 5 or 6 weeks have passed. Sometimes it goes faster and sometimes a little longer depending on a variety of circumstances. (As an example, it once took 6 months to simply on a home located outside Paradox, CO – thankfully the client expected it given his remote location. We were all glad when that file closed!)
At the Closing, you will need to sign all the final documents. Most of the papers will look familiar as you had seen them earlier in the process. At this point, folks should find that the Closing Papers are a review of information. However, these are the final documents so if you have questions, now would be the time to get clarification!
Generally, you go to the Title Company to sign the papers. However, if that is not convenient or possible, arrangements can be made for the Escrow Officer or a Notary to meet you at your home location you will likely pay a fee for that extra service. That said, in an attempt for us to keep your closing costs as low as possible (we always do) we encourage closing with the Escrow Officer at the Title Company.
Before disbursement of funds (before you get your money), there is a required three-day “Right of Rescission” period that must be observed. This is a period during which you can choose to cancel the transaction. On any type of refinance (forward or reverse) of a primary residence, Federal law requires the lender to wait three business days before disbursing funds.
After the loan is “Funded”, you then have access and may use the money however you wish.
4. REPAYMENT (HOME RUN!)
For the life of the loan, you do not need to make a monthly mortgage payment. However, if you wish to make a payment, you certainly can!
Remember, you are responsible for the payment of property taxes, insurance and to maintain the property in a normal manner. Reverse Mortgages are due when the borrower no longer occupies the home. If death of the borrower occurs, the heirs/estate may repay the loan from the sale of the home or refinance the home.
While you clearly understand how the reverse mortgage program works, your heirs may not be as well-versed on the subject. So, when the time comes, they can contact Colorado Reverse Mortgage and we’ll guide them as to what steps they should take.
When you choose Colorado Reverse Mortgage to assist you with your needs, our job may be completed at time of Closing, but our commitment to you is for life.
Colorado Reverse Mortgage… Helping you move forward, in Reverse!