How to Get a Reverse Mortgage

A Reverse Mortgages is a residential loan program for seniors 62 years or older that allows them to borrow a portion of their equity without having to make repayment as long as they occupy their home as a primary residence. It is called a reverse mortgage because it is a loan with increasing debt and decreasing equity as opposed to a traditional or "forward" mortgage which has decreasing debt and increasing equity. The most popular type of reverse mortgage is the FHA program called a HECM (Homeowner Equity Conversion Mortgage) which accounts for well of 90 percent of all reverse mortgages.

Steps

1. Educate Youself Learn as much as you can about the loan. A good resource would be someone you know that has a reverse mortgage, information is also available on the internet or you local bookstore or library.
   
   
   • Reverse mortgages are not easy to understand. It takes takes time to absorb so don't worry if you get confused.
   • Try to use more than one resource, different explainations can shed light on certain aspects better than others.
   
   
2. Shop Around All HECM lenders fees are mandated by the federal geovenment so the costs are virtually the same no matter where you go. The major difference between lenders will be the level of service.
   
   
   • Lenders cannot charge more than what is provisioned by HUD (the agency that administers the loan) but they are allowed to discount their fees by lowering their commission. If a lender offers a discount it is not necessarily better. New and inexperienced lenders may undercut competition in order to get business.
   
   
3. Obtain Counseling Before a lender can begin processing your loan you must obtain a certificate from a third party independent counselor who will expain what the loan is and identify any alternatives.
   
   
   • The counselor must be certified by HUD and cannot charge you a fee for the session.
   • You must go through counseling in order to start the process, even if you have already made up your mind.
   • Watch out for counselors who suggest any particular lender, they may be getting kickbacks. Counselors are prohibited from steering borrowers to any particular lender, if a counselor recommends a lender to you, they are not only unethical but violating regulations as well.
   
   
4. Get The Ball Rolling Once you select a lender and schedule and application make sure you know what documentation and information you will need to provide.
   
   
   • Be open about anything that is attached to your property from the beginning (ie. existing mortgages, liens, etc,..) It will make the process smoother and can circumvent a rejected loan which may cost you money.
   • There are no credit, asset, or income qualifications required for the loan so do not overstate or withold financial information from you lender. They need the information merely for verification and data reporting purposes.
   
   

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