A reverse mortgage enables the senior homeowners to borrow money from their homes but do not make regular payments. It is actually a form of an MS, a loan that does not require a repayment until one vacates, sells the home, or dies.
With the population of seniors in America rapidly rising, reverse mortgage is a rising financial choice for the elderly. This guide simply outlines and enumerates the basic procedures involved in applying for as well as securing a reverse mortgage.
So, continue reading before you look for questions to ask a mortgage broker.
Find Out If You’re Eligible
To begin with, ensure you satisfy all requirements that define an eligible applicant for a reverse mortgage. The most minimum qualifications include being 62 years and above, owning a home and paying little or no mortgage, and using the home as a primary residence.
Your home must also conform to the minimum property requirements set by the Federal Housing Administration (FHA). Satisfying these qualifications first suggests that you may be eligible to apply for a reverse mortgage.
Furthermore, you will be subjected to a credit check, whereby the lender will verify your income to pay for property taxes and home insurance, and whether the loan will consume most of the home’s equity.
Select A Reverse Mortgage Type
Currently there are three types of reverse mortgages available in the market. These include the FHA-insured Home Equity Conversion Mortgage (HECM), single-purpose reverse mortgages provided to some states and nonprofits, and other reverse mortgages from various private entities.
HECM reverse mortgages are most popular to you while giving you special features of protection. Also, HECM products have relatively higher lending limits than the proprietary or single-purpose products.
When comparing reverse mortgage programs focus on interest rates and fees, loan limits and other costs to find the best loan option that meets your requirements. Seeking advice from an independent housing counselor at this point will also be useful. This means finding and adhering to a spending plan to make sure that the available funds last for the retirement years in the home.
Seek An Independent Counselor
HUD certified independent housing counselors receive rigorous reverse mortgage training to give you impartial information that fits your circumstances. The counseling is designed to make sure that you adequately consider.
The following are the requirements and costs to be elucidated by the counselor to the potential borrowers: requirements and costs, financial consequences, options other than reverse mortgage, borrower responsibilities, among others.
This counseling has to be face-to-face or by phone before a potential borrower is approved for the loan. At the end of your session, the counselor presents to you with a certificate to ascertain that you have complied with this rule.
Submit Your Application
Having received the certificate of completion, you can now proceed to formally apply for the reverse mortgage. When one applies for multiple loans within a 30-day period, the credit bureaus only pull credit report once to reduce the effect on one’s credit score.
Your lender assists you with the short term mortgage loans to provide the list of documents which should include proof of age, proof of home ownership, statement of your financial capacity to meet the obligations and counseling certificate as may be required.
Lastly, read through the terms and conditions of your loan documents and seek clarification for any aspect that you do not understand before signing to finalize your reverse mortgage.
Conclusion
We have now discussed a few important stages of reverse mortgage application process, that is, preliminary assessment of your qualifications for the loan, comparison of the available options, receiving professional assistance in the form of counseling, making the application and getting approved for your loan.
The result is being able to tap into your home equity and live in your house without having to make any payments. Thus, following this guide enables you to make a sound decision as to whether you need a reverse mortgage for retirement.
The funds are tax-free and one is at liberty to use them in any way they wish without the dictation of the lender. It allows you to eliminate debts, cover healthcare expenses, fund renovation, enhance retirement earnings, or anything per your preference.
