Taking Care of Mom and Dad: Steps to the Loan Process
vided by a HUD-approved agency or by a Fannie Mae specialist over the phone. Counseling protects your parents by informing them about what a reverse mortgage means and how it will affect them. The counselor explains different options available and makes certain that they are eligible for a reverse mortgage.
Applying for the loan is also a step in the process. Your parents fill out an application for a reverse mortgage with the lender and select a payment option: fixed monthly payments for life, fixed monthly payments for a finite period, lump sum payment, line of credit or a combination of the above. The lender discloses to the consumer the estimated total cost of the loan, as required by the Federal Truth in Lending Act. The lender then collects money for a credit report (if applicable) and home appraisal.
Credit standards for reverse mortgages are usually easy to meet. However, some credit problems -- personal bankruptcies or other major problems -- may make a reverse mortgage difficult to arrange. Bad credit may mean lower loan amounts.
Your parents will need to supply the lender with required documents -- photo identification, verification of Social Security numbers, copies of the deed to their home, information on any existing mortgage on the property and a counseling certificate (if required).
The lender processes the loan, orders an appraisal to determine the value of the home, title work, lien payoffs, credit report and verification of deposit. The appraiser prepares an appraisal report. If your parents' home is suspected to have structural problems, a physical inspection of the home will be required.
After receiving all pertinent information and data, the lender finalizes the loan parameters with your parents, packages the loan and submits the package to the underwriting department for underwriting and final approval.
Following approval, a closing of the loan is scheduled. The loan's interest rate is set. The interest rate impacts the amount of funds available to your parents. Also impacting the fund amount is the age of your parents and value of their home. Closing papers and final figures are prepared. Closing costs are normally financed as part of the loan. Previous payments by a consumer for appraisal and credit reports may be refunded or used to reduce the closing costs financed. The lender (or title company) has your parents sign the loan papers.
