W
hat is a reverse mortgage and how do you apply? In simple terms, it is a program for senior homeowners, 62 years or older, seeking to use their home's equity.
Senior homeowners in time require finances to cater for varying things such as paying their existing mortgage or repair and maintenance of their home. This is when you will find them asking what is a reverse mortgage and how do you apply in their quest to get extra funds.
Before applying for a reverse mortgage, you have to fulfill several requirements, the basic one being the age which is 62 years or older. Other requirements include:
a) Own your home outright and if not, have a low mortgage balance that can be paid off at closing with proceeds from the reverse mortgage loan
b) Have sufficient funds for ongoing property charges that include taxes, insurance and maintenance and repair costs
c) HUD (Housing and Urban Development) counsellor’s approval after discussing the financial implications of the loan and other loan alternatives
How to apply
Initial application
This is the step where you give the lender legal authority to start the application process. Here is when reverse mortgage loan amount, fee and interest rate will be disclosed. At this point, the application is not binding and can be canceled.
Counseling and certification
This step involves education of what reverse mortgage entails. It is mandatory for applicants to undergo counseling, after which they are awarded certification. At this point, no costs are incurred, and you can cancel the application.
Appraisal
This is the process that determines the value of the home that you want to take a reverse mortgage on. The appraisal is done by Federal Housing Administration (FHA) approved appraiser meaning that even if a home was recently appraised, the process is most likely to be done again.
Ownership confirmation
This is the second last step where the lender seeks to establish whether you are the legal owner of the property. The process also establishes any liabilities a home might have such as concerns with trusts, bankruptcy claims, and unpaid dues among others. By the end of this step, the lender will either approve or reject the application. If approved, a closing date is set.
Closing
This is where you sign final closing documents after reviewing and ascertaining that all is well. From there, three waiting days are set where you can cancel the application with no penalties. After three days, the process is done, you receive the funds.
Question answered, what is a reverse mortgage and how do you apply? Above is all you need to know about reverse mortgage and application process.
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