Applying for a reverse mortgage loan generally involves providing personal and financial information to your lender of choice, who will then determine whether you are eligible or not. There are several fees that you may be charged with during the application process, but some can be paid with proceeds from the loan.
Familiarize yourself with the most common fees involved in applying for a reverse mortgage.
Applying for a Reverse Mortgage
Once the counseling session is completed and you decide to continue applying for a reverse mortgage, you now choose a lender. You will then speak with their representative, usually called the loan originator or loan officer.
The loan officer will ask for your personal information and check your eligibility. If so, you may be asked which payment plan you’d like – a lump sum amount, a line of credit, fixed monthly payments, or any combination of these. It’s important to remember that even if you’re eligible for a reverse mortgage, you are not obligated to do proceed. You can always change your mind.
The lender will then analyze your income sources, such as pensions, Social Security or 401(k)s, and determine whether you have sufficient money left over to pay property taxes and home insurance after paying typical daily living expenses.
If not, the lender can authorize a set-aside amount from your loan which will pay these future charges. You can also opt to set-aside an amount voluntarily even if you don’t need it.
Reverse Mortgage Costs
There are several fees that the lender may charge to process your application and administer your loan.
- Origination fee
- Mortgage Insurance Premium
- Appraisal Fee
- Closing Costs
- Servicing Fee and Set-Aside
You can review each of these particular fees here: Reverse Mortgage Fees and Costs
Your lender is required to provide as full a disclosure as possible about the reverse mortgage transaction. You should receive additional disclosure documents intended to make the process transparent.
One of these documents is the Total Annual Loan Cost (TALC) Disclosure, which presents how the outstanding balance of the loan may look at different points in the future.
Another is the Good Faith Estimate document, which lists all the various fees you’ll be charged.
You will be considered to be formally applying for a reverse mortgage once you provide the lender the following after counseling:
- Your loan application
- Signed counseling certificate
- Signed disclosure documents
- Verified Social Security number
- Copy of the deed of the home
- Existing mortgage information
The lender will then process or underwrite your application.
Next step: Underwriting