I cannot recall a better time to get a reverse mortgage. Rates are the lowest that I’ve seen (I’ve been specializing in originating reverse mortgages
since 2003), and property values are still high.
“But I need someone to walk me through the process without getting me sick from Coronavirus (Covid-19)”, you say. Here is how you do it. However,
before I get to the details, I want to make sure you know what a reverse mortgage is.
What is a reverse mortgage?
Most reverse mortgages (90+%), are FHA (Federal Housing Administration), insured loans specifically designed for homeowners age 62 and above. It
allows you to access a portion of the value of your home into cash without having to sell your home, give up the title, or obligate yourself to a monthly
mortgage payment. The home stays in your name so you, as the homeowners, are responsible to pay your property taxes and homeowners insurance
and as maintain the home.
Reverse mortgages are not free money. This is still a loan and you are still charged interest (and mortgage insurance with the FHA program).
The twist though is that as long as at least one of the homeowners continue to live in the home as their primary residence, keep current on the property
taxes and homeowners insurance, and maintain the home, no monthly payment is required. However, since interest and mortgage insurance
are still being charged, the loan balance is growing larger over time.
The FHA name for their reverse mortgage program is called the Home Equity Conversion Mortgage (HECM). This is a very popular program because the
rates are very low and there is incredible flexibility with how you receive the money.
The process of obtaining a reverse mortgage has several steps:
- Education (what you are doing now)
- Reverse mortgage counseling (FHA required)
- Shopping for a lender & getting quotes
This brings us to the topic of this article.
How do you complete all these steps and still stay safe?
- Education: This is the easiest step as long as you have access to the internet. The best site to visit (other than mine,
of course), is at www.reversemortgage.org. This is the site for the National Reverse Mortgage
Lenders Association (NRMLA). This site has a lot of very good information as well as a list of member lenders. The ones with the CRMP
logo are the most experienced and must obtain additional education and testing to ensure they know what they are doing. If you do this
part on-line or over the phone, you will not have any additional exposure to COVID-19.
- Reverse mortgage counseling: As stated above, HUD (Department of Housing and Urban Development) requires all homeowners to talk
with an independent third-party approved by HUD. This is to make sure you understand how the reverse mortgage works as well as your obligations
to maintain the loan. The counselor will also discuss possible alternatives to the reverse mortgage (for example, selling the home).
This is best if done in person but is also available over the phone.
- Shopping and obtaining quotes: If you have availability to the internet, this can be completed in a very safe and easy way.
I recommend going to the NRMLA site at www.reversemortgage.org and use the “Find a Lender” dropdown
box in the upper right corner of the home page to locate a local company. Call or e-mail that company and provide the following information:
- Dates of birth for all homeowners
- Estimated value of home
- Estimated amount owed (if any) on the existing mortgage(s)
- Make sure to give all lenders the same numbers (don’t give one lender a value of $400,000 and another one a value of $425,000). You want to have
an apples-to-apples comparison.
Do NOT give your Social Security numbers to any lender at this stage of the process! They do not need it to give you a quote. If they say they must have it, hang up!
Tell the lender you want the quote from to e-mail you the quote. You will need to provide them with your e-mail and some may also ask for your address.
If you do not have access to e-mail, ask them to mail it to you. If they don’t do it, you don’t want to do business with them anyway.
- Application: I honestly think this is best completed in person, however, given the interesting times we are in, it can also
easily be done through the mail or over the computer. If you want to do it with e-signatures, this will require you to set up a password
to open the e-mail and can be frustrating for some people who know how to use e-mail but are not fluid with technology. The easier way for
most people is simply to have the loan officer to overnight you the documents. You can call him/her when the package is received and the
loan officer will go over each page with you over the phone. Once signed, you stick it all in another overnight envelope and send it back.
So far so good! You have yet to increase your risk of exposure. The next step is a bit more difficult but can still be completed safely.
- Appraisal: Your home will need to be appraised. This means allowing an appraiser inside your home to look around, measure
and take pictures. Someone will need to be there to allow the appraiser access to your home, but it doesn’t have to be you. You can
wait in the car in the garage or go for a walk while a relative let the appraiser in. If this is not an option, offer the appraiser some
disinfecting wipes and ask him to clean everywhere he touches.
- Closing: This is the final step. This is where you sign all the final documents. Normally, I come to your home with
a notary and go over everything with you to sign. If you don’t want me there, I do not have to be present, but the notary does. Unfortunately,
FHA does not allow you to sign the final papers electronically. You can ask the notary to be as careful as possible and not touch anything.
Also, you can use your own pen. It does need to be blue ink.
That is the best way to get a reverse mortgage and be as safe as possible.
Unfortunately, the last couple of steps do require some very limited person to person contact. The last option of course is doing all the homework
and counseling and then waiting until this virus settles down to begin the actual application process.
I think the rates will still be low and property values should not be impacted too dramatically over the next couple of months. I think later in
the summer and fall, we may see values decline as a result of the economic slowdown, but hopefully by next summer, they will bounce back.
If you have any questions about this topic or anything else relating to reverse mortgages, please call me at 303-467-7821.