The Process of Getting a HECM / Reverse Mortgage Loan

Research and Build Awareness

A reverse mortgage is a way for older Americans to convert some of their home equity to pay off their current mortgage, if they still have one, and create more cash flow to cover everyday expenses, home renovations, medical expenses and other needs and goals. It’s different from any other kind of mortgage because you don't have to repay what you borrow until you leave the home or do not comply with the loan terms. You are still responsible for maintaining the home and paying all property taxes and homeowners insurance, as you would with a traditional mortgage. Borrowers could be subject to foreclosure for reasons including failure to maintain the property or to pay taxes and insurance.

Check Eligibility Guidelines

• You must be at least 62 years old (a spouse may be younger).
• You must own your home and live in it as your primary residence.
• You must have sufficient equity in your home (no mortgage or small loan balance relative to your home’s appraised value)
• You must live in a single-family home, multi-family home (up to 4 units), FHA-approved condominium, or a HUD-approved manufactured home constructed after June 15, 1976.
• You must undergo a financial assessment to determine your financial capacity and willingness to pay your loan obligations, such as property taxes and homeowners insurance. Employment or boasting a certain credit score is not an eligibility requirement.
• You must participate in a HUD-approved counseling session in person or by phone during which an unbiased reverse mortgage counselor will speak with you about the many aspects of a reverse mortgage in helping you determine if the loan or another option would be the best fit for you financially.

After Counseling

Once you and your counselor are comfortable that you understand how a reverse mortgage loan works and how it compares to all your other home equity alternatives, your counselor will issue a Certificate of HECM Counseling, verifying for your lender that you have successfully completed your counseling. Only when your lender has received your certificate and all other required information, will it submit your application for processing and underwriting review.

Your projected loan amount will largely depend on the value of the home (minus any liens against it), the age of the youngest borrower or eligible non-borrowing spouse, and current interest rates. 

To determine home value, an independent, licensed appraiser will conduct an appraisal, factoring in your home’s conditions, comparable sales in the neighborhood, etc. Then the completed appraisal will be submitted to processing and underwriting as part of your loan package.

If the home valuation, processing, and underwriting process leads to an approved loan, you will sign final loan documents at the loan closing and confirm how you wish to receive disbursement of your loan proceeds.

Disbursement Options

Because no two situations are alike, you have various options for receiving your reverse mortgage loan proceeds. To determine which type of reverse mortgage disbursement plan might work best for you, connect with us and we can walk you through all of your loan options. You also have the option of mixing some payout plans for added flexibility.

Lump Sum Payout: 
Take the proceeds in one lump sum, a strategy to pay off large expenses.

• Draw 60% of your accessible funds (the maximum amount) in the first year.

Term or Tenure Payout
Receive fixed monthly payments to supplement your income.

• With a term reverse mortgage loan, select the number of years you’d like to receive payments.
• With a tenure reverse mortgage loan, receive payments for as long as you live in the home and comply with loan terms, such as maintaining the home and paying your property taxes and homeowners insurance.

Growing Line of Credit
Establish a growing line of credit that you can tap into when needed.

• Use the line of credit as a safety net that can be used when unexpected expenses arise.
• Watch the unused principal grow over time, giving you access to more funds the longer it goes unused.