Receiving a reverse mortgage loan can feel like a significant undertaking. After all, you are using the equity you’ve built in your house to gain spendable, liquid funds. This is very helpful for many, but it is undoubtedly a notable change in your life. Because it is a big decision, it is crucial for you to have a strong, well-informed grasp of what you should expect. This is especially important given the prevalence of false information that surrounds these loans. In today’s blog, Family Home Loan Texas delves into the entire reverse mortgage process and describes all its aspects from start to finish.
The Beginning Steps
The first, and perhaps most important step of the process is receiving ample education about these loans. Typically, the first person you meet with is a loan specialist who can help you determine if a reverse mortgage is right for you and your needs. If you decide that it would be a helpful tool for living on your own terms, you will then meet with a third-party reverse mortgage counselor who’s approved by the U.S. Department of Housing and Urban Development (HUD). This is a mandatory step, and your loan officer cannot move forward with the mortgage until you meet with this independent counselor. During this meeting, they will walk you through all aspects of the loan, so you fully understand the necessary qualifications and what to expect if you are eligible for one.
As a refresher, to qualify you must be at least 62 years old, and the home you are taking the loan on must be your primary residence. This typically means that you must spend at least six months of the year living in the house. While you do not have to have your original mortgage completely paid off to qualify, any money you receive from the reverse mortgage will first go to paying off your remaining balance; you then get the funds that remain. The home can be a house, condominium, or townhome. It typically needs to be a single-family residence, although you can still take out this sort of loan on a small rental property that has up to four units — one of them being where you live. Finally, your third-party counselor will explain the financial requirements that are needed. This includes showing your income, assets, credit score, and others. Although you are going to be receiving money rather than paying it, you still need to prove that you can maintain the home, pay property taxes and insurance, as well as cover initial application fees. The person you meet with will go more in-depth on what to expect, but this covers the basics of the loan.
Submitting Your Loan
Once you meet with counselors and loan officers and determine that this type of mortgage makes sense for you, you will need to submit an application to the lender of your choosing. As noted above, you will need to provide financial information that proves you can cover the associated costs — primarily maintenance and taxes. To make the process as easy as possible, you should gather any relevant financial documents early on, so you can move quickly and efficiently.
Next, the value of your home will be determined by an independent appraiser. This is to ensure that you are receiving an appropriate amount of money from your lender. This is important because you will never have to pay back more than your home is worth; therefore, your lender wants to make sure this amount is accurate. This appraisal and the overall loan package are then sent to an underwriter for approval. During this step, the underwriter ensures that all the included information is correct and adheres to all relevant laws, regulations, and best practices.
Once your application is approved, you will sign closing documents with either a title office or attorney — this depends on what your state requires. There will be closing costs, but these are wrapped up in your loan overall, which means that you won’t have to pay them until you pay back the loan. After closing, you will likely receive your funds in three days. As mentioned earlier, any money you still owe on your existing mortgage will be paid off first, and then you will receive the rest.
You Decide How To Receive Your Funds
Once you have finished the reverse mortgage process, you will have the financial flexibility to both receive and spend your money however you like. If you want all of it at once, you can opt for a lump sum. With this choice, your interest will be at a fixed rate. You can also choose to get your money as regular payments, a line of credit, or a combination of both. With these options, you will have an adjustable interest. It is important to note that you will not have to pay any interest on funds you don’t use from a line of credit. This can be a great choice if you do not have anything you need to pay for immediately.
A major benefit of a reverse mortgage is that you do not have to pay any interest until the loan is due, so the money you get is fully yours. Moreover, it is considered non-taxable income so you can keep more than you may expect. Ultimately, you will not have to pay back the loan until you cease living in your home. As you can see, this type of loan is incredibly helpful for those of age who either need to pay off major expenses or who simply want to enjoy more financial freedom during their retirement.
Contact Us For A No-Commitment Consultation
We understand that a reverse mortgage is a significant undertaking, so we are here to help you through every step of the entire process. We want to assist you in enjoying your financial flexibility. Family Home Loan Texas was founded by loan originator and long-time mortgage professional Rob Bramer. Rob has helped clients secure the loans they need both locally and nationally and can help you get the loan you need to live life on your terms. Call 1-800-990-LEND (5363) to speak with Rob about a reverse mortgage loan and to receive a free, no-commitment consultation.