Everyone could use some extra cash, especially in retirement years. And while options for generating additional retirement income once seemed limited, reverse mortgages have provided today’s seniors with access to another source of wealth—their home equity.
Designed for homeowners ages 62 and older, a Home Equity Conversion Mortgage (HECM)—also known as a reverse mortgage—lets you access a portion of the equity in your home to use as you wish. And with today’s seniors owning over $11 trillion in housing wealth,1 you may have more equity in your home than you think.
Just like a traditional “forward” mortgage, the process to secure a reverse mortgage loan has multiple steps. From initial education and getting all of your questions answered, to signing the closing documents and receiving your funds, these steps are all part of the lifecycle of a loan—and do not happen overnight. So how long does the process take?
If you’re considering a reverse mortgage, here’s what you can expect.
The first step in the reverse mortgage process is deciding whether the loan is right for you. Like all decisions, you’ll want to make sure you have all the information you need to make a well-educated and informed choice. From how much you can receive in proceeds, to loan requirements, disbursement of funds, and possible implications for your government benefits, you likely have a lot of questions when it comes to reverse mortgages. A knowledgeable reverse mortgage lender can answer these questions and more. Learn more about what to look for when selecting a reverse mortgage lender here.
Once you’ve decided that a reverse mortgage is right for you, the conversation doesn’t stop there. Before you can officially submit your application for a reverse mortgage, you’ll be required to meet with an independent third-party counselor approved by the US Department of Housing and Urban Development (HUD) to discuss the responsibilities that come with a reverse mortgage. And while reverse mortgage counseling is a requirement, the process is designed with you in mind. By meeting with an independent counselor, you can deepen your understanding of the reverse mortgage and get answers to any remaining questions you may have. Upon completion, you’ll be issued a counseling certificate.
Learn more about reverse mortgage counseling here.
Once you’ve received counseling and provided your lender with a copy of your counseling certificate, your application can be submitted. The reverse mortgage application process is just like that of a traditional mortgage. Working with your lender, you will be asked to provide documentation such as your date of birth, proof of income, Social Security number, homeowner’s insurance, and if applicable, a mortgage statement and complete copy of a Trust. Upon receiving this information, your lender will begin to collect any other necessary documentation needed to complete the loan.
When it comes to how much money you can borrow, your home value plays a key role. And while the appraisal is designed to assign a value to your home, in the case of a reverse mortgage, the appraisal also ensures that your home meets HUD’s minimum property standards. At Longbridge Financial, we order these services from an Appraisal Management Company (AMC) on your behalf. Once ordered, you will receive a call to schedule the evaluation of your property with a local Federal Housing Administration (FHA)-approved appraiser. Upon arrival at your home, you can expect the appraiser to turn on the stove, check the heat, examine the attic (if applicable), and conduct a thorough walkthrough to ensure the home does not present any health or safety concerns.
Due to the COVID-19 pandemic, appraisers are taking extra safety precautions, including wearing gloves, shoe coverings, and masks when entering your home. Alternatively, you may be able to elect for exterior-only appraisals. For more information, contact your lender.
The turnaround time in which we receive your appraisal in order to move forward with your loan can vary2, depending on the availability of an appraiser in your area. Just like every other step, we’ll walk you through the appraisal process to ensure you’re comfortable and your loan remains on track.
Once your appraisal has been received, your loan file will be reviewed by an underwriter. The underwriting process determines that all requirements have been met based on the submitted documentation for the reverse mortgage.
Unlike a forward mortgage where underwriting is often an automated, machine-generated process, reverse mortgage underwriting is manually performed and reviewed by a live Direct Endorsement Underwriter.
Upon reviewing your loan application, the underwriter will issue a disposition—your loan may be either approved, approved with conditions, or denied for a specific reason. If you’ve received conditional approval from underwriting, you may need to submit additional documentation to receive final approval. These can range from simple income documents to proof of home repairs.
At Longbridge Financial, our Loan Officers and Processors will stay on top of any additional documents required and work with you to get final approval on your loan as efficiently as possible. Once underwriting is complete and you’ve received final approval, your loan status is changed to “clear to close.”
Now that your reverse mortgage originator has completed all the necessary submissions for your loan, the underwriter has issued final approval and your loan is deemed “clear to close,” the file will be moved into the closing department where the loan closing documents will be issued.
Since these documents require your signature, a closing agent or attorney will come to your home or a public location of your choosing to review the file. You will also receive a full copy of the documents for your own personal records.
At Longbridge Financial, our internal closing department will assist you in scheduling a time for a signing assistant to meet with you.
Depending on the type of reverse mortgage you’ve selected, you can opt to receive funding as a lump sum or monthly payment, a draw on the loan as a line of credit, or a combination of these options. Three business days after you sign your closing documents, your funds will be disbursed, and any outstanding liens or existing mortgages will be satisfied from the loan proceeds3.
Longbridge Financial is not only a lender – we’re a servicer too, so we will continue to provide service on your loan beyond closing. We’ll remain your point of contact for the life of your loan, responsible for assisting you with anything you may need related to your reverse mortgage, including loan summary details, transactions, occupancy and draw requests, and answers to any questions that you may have. Within 30 days after your loan has funded, we send you details regarding your loan’s servicing information via mail. Learn more about our servicing department here.
There you have it: the reverse mortgage loan process. Remember, even after your loan has closed, you still must meet its obligations – occupying the home as your primary residence, keeping current on taxes and insurance, and performing routine maintenance to keep the home in good repair.
So, let’s address the top questions a potential borrower often has: “How long is the process?” or “How long until I receive my funds?” While the answer largely depends on the time taken to complete all the above steps, the cycle of the loan may also vary from lender to lender.
Here at Longbridge, our goal is to close your loan within 45 days of receiving your application and counseling certificate—and we’ll make every effort to close even sooner. We’re committed to doing everything we can to make the process as seamless as possible, and we’ll provide regular updates at least once a week on the status of your loan.