A reverse mortgage gives you access to funds in exchange for a percentage of the equity in your home. This type of loan is a great option if you require funds, provided you intend to continue staying in your home at least until the loan term is over.
Where Do You Get a Reverse Mortgage Loan?
The Home Equity Conversion Mortgage, or HECM, is one of the most popular types of reverse mortgage loans. HECMs are backed by the Federal Housing Administration (FHA). Although you will be able to find other reverse mortgage loans, it’s important to remember that these loans may not necessarily offer the same level of consumer protection a HECM does. So, if you are considering a reverse mortgage, it’s best to opt for one from an FHA-approved lender.
Eligibility Criteria for a HECM
- You should be at least 62 years old
- Your and/or your spouse use the home as a primary residence
- You either own your home or have enough equity in it
- You don’t have any delinquent federal loans
- You’ve attended a HECM counseling session
- You pay homeowners insurance, property taxes, and all other maintenance costs
- Your property meets the FHA’s standards
Applying for A Reverse Mortgage Loan
- Gather documents: First, you’ll want to gather the required documents, which include your 401(k), Social Security number, pay stubs (if you are still employed), and proof of pension, among other things. Once you have your documents ready, you’ll need to find an FHA-approved lender and apply for a refinance mortgage loan.
- Financial assessment and property appraisal: The lender will then perform a financial assessment, which will include checking your credit score and previous payment history. If everything seems in order, the lender will have your property appraised for its value. This will determine how much you can borrow from the lender.
- HECM counseling: All prospective borrowers are required to undergo a mandatory HECM counseling session. The objective of this session is so prospective borrowers understand the pros and cons of taking a reverse mortgage loan.
- Closing the loan: Typically, once all the above-mentioned processes are completed, you can expect your lender to close the loan within 30 days, after which you’ll receive the funds in your account.
Once you receive the funds, it’s best to set up automatic monthly payments for the duration of the loan term.