Counseling is required for all individuals applying for a reverse mortgage. It’s necessary to receive expert advice from licensed counselors because the borrower will be involving their most valuable property, their primary home, in the transaction.
Find out what to expect in your counseling session, and how to ensure that you receive all the essential information you need to know about reverse mortgages.
Why is Counseling Necessary?
Counseling provides consumer protection for applicants, and ingrains caution in them to proceed only once they fully understand how the financial product works.
All reverse mortgage applicants are required to receive counseling prior to proceeding with the process in order to provide them the information needed to make a confident decision. A reverse mortgage involves a family’s biggest asset, their home, in the transaction, and it is particularly meant for older individuals who will usually have only a fixed income.
What to Expect
Counseling for reverse mortgage applicants is not similar to psychological or therapeutic counseling. It is actually more of a tutoring session, in which the counselor fully explains the details of the reverse mortgage, clarifies complicated points and answers your questions.
During the counseling session, you and your counselor will discuss the following:
- How reverse mortgage works
- Your financial goals and your reason for applying for the loan
- The implications of the loan over your finances and taxes
- Costs associated with reverse mortgage
- Possible alternatives like financial assistance or grants that you may be eligible for
How Counseling Works
The Department of Housing and Urban Development oversees licensed counselors who are trained to provide neutral counseling sessions to those interested in a reverse mortgage loan. Lenders or loan originators are not allowed to specify which counselor or counseling agency you should go to. Rather, they must present you a list of local counselors and national intermediaries that you can pick from.
Counseling sessions can either be face-to-face or done via phone, and it typically last for 90 minutes. You can expect a counseling session to be scheduled about three to ten business days from the time you call the counselor or agency.
Counselors generally charge $125 to $250 per session, but some waive this fee and provide free counseling due to financial grants. Once the session is completed, both you and your counselor will sign a certificate that verifies you have completed this requirement.
Next step: Application