Loan Process
The loan process for Reverse Mortgages is fairly structured and can take anywhere from 3-6 weeks (give or take) from complete package to funding depending on the conditions received by the underwriting department. Below are the general steps and timeline for a HECM reverse mortgage.
At no point during the loan process are you obligated to continue or are in a binding contract until after the 3 day right of rescission. If at any point you decide to cancel then all you are obligated to pay is any fees already procured in the process of obtaining a reverse mortgage, which would be the appraisal, credit and flood certificate fees.
1) Application - First you meet with a reverse mortgage specialist to discuss your options and decide what program best suits your needs. An application and applicable disclosures are then signed, resulting in a meeting of about an hour.
2) Counseling - All parties on title must obtain counseling through an independent FHA approved counseling agency. We cannot begin processing your application and move forward until this counseling is completed, per FHA guidelines. The counseling itself takes generally a week to make the appointment and is usually done in person, but can be done over the phone. The counseling generally takes between 30-60 minutes. For special circumstances, such as a Conservatorship or Power of Attorney, please read for clarification of the counseling requirements. Steps one and two are interchangeable.
3) Appraisal - After counseling has been completed an appraisal is ordered to establish a value to your home. This can take anywhere from 1-2 weeks and is generally what slows the process down. The appraiser must be FHA approved. In the rare case that the appraiser notes any structural damage, or the pictures indicate damage, then a pest inspection may have to be ordered in order to obtain repair bids. These bids are required in order to insure that the property meets FHA guidelines. Oftentimes the repairs are done after the reverse mortgage is closed and the reverse mortgage proceeds are used.
4) Underwriting - Once complete package including counseling certificate and appraisal has been received it is submitted to the lender for underwriting. During this step the approval is obtained, which generally takes anywhere from 1-3 weeks.
5) Closing - After lender's approval, all relevant figures - such as the interest rate, amount to be received, how you would like to receive your funds - are finalized. A date is set to sign the closing documents with the Title/Escrow company.
6) Funds Disbursed - Once docs are signed they are sent back to the lender. From the date they are signed you have a 3 day right of rescission. Once the 3 day right of rescission has expired the funds are then disbursed. If an initial draw was requested then this would be mailed to you or deposited directly into your bank account. Your line of credit would be available at this point, or if you decided on the monthly income then you would receive your first payment on the 1st of the next month.
7) Repayment - The final step would be the repayment of the reverse mortgage. This only happens if you no longer reside on your property or it is no longer your primary residence. The principal balance plus interest is paid back with or without the sale of the house, and the remaining equity goes to your estate or heirs.