In previous posts, I have explored the decision to obtain a reverse mortgage, and the process that is necessary to produce such a decision. With today’s post, I want to explore a different process- that of actually obtaining a reverse mortgage.

1. Once you’ve decided that a reverse mortgage is right for you, the first step is to confirm that you are indeed eligible to obtain one. You can refer to our handy flow-chart in order to make sure that you meet all of the requirements. If there is any uncertainty, you can skip ahead to step two/three, and ask your prospective lender to confirm your eligibility.

2. The next step is to select the type of reverse mortgage that you wish to obtain. While for many, an HECM reverse mortgage is the obvious choice, it also makes sense to examine single-purpose and proprietary reverse mortgages, as they may offer better terms. I explained the difference in a previous post.

3. Depending on which type you’ve selected, you will then need to identify a handful of suitable lenders and establish contact with them. You can find a list of single-purpose reverse mortgage lenders here. If you’re looking for an HECM lender, I would recommend browsing the National Reverse Mortgage Lenders Association (NRMLA) lender listings. You are advised to avoid responding to solicitations and to avoid working with intermediaries (brokers, estate planners, etc.), who will simply steer you to favored lenders and take a commission for doing so.

4. Obtain quotes from each of the lenders, including the interest rate, origination fees, and insurance costs. Some lenders have started to waive certain fees, and you might be surprised by how much they now differ. In such cases, make sure that there are no strings attached, and try also to understand how, if it all, mortgage terms vary between lenders.

5. On the basis of the quote and face-to-face meetings, you should select a lender and begin the application process. At this point, you will have to decide how you want to accept distribution of the proceeds, whether as a lump-sum, monthly (term/tenure) payment, and/or line of credit.

6. At this point, the lender will begin to process your application and appraise your home. Aside from your age, this appraisal is the biggest variable in determining the size of the reverse mortgage for which you are eligible. Remember: you don’t need to take all of these funds. You can choose the size of your mortgage, as long as it falls within the limits set by the FHA.

7. Before the loan can close, you will need to complete a counseling session with a HUD-approved organization, and present the certificate from the session to your lender.

8. After the lender signs off on the paperwork, the loan is closed. From this point, you have three days to review your decision, and if you’re not satisfied, you have the right to a penalty-free cancellation. If you choose not to exercise this right, the funds will be distributed to you in the manner that you specified, and the reverse mortgage will begin accruing interest.

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