How fast can you get a reverse mortgage?

With a traditional mortgage, borrowers are required to make monthly mortgage payments to pay down the debt. However, with a reverse mortgage, the homeowner receives payments from the lender, and he/she can use these funds to pay healthcare costs, property taxes, and other expenses. If you have applied for a reverse mortgage, it can take some time to get approved.

You can get approved for a reverse mortgage in 30 to 45 days if you follow the right reverse mortgage application process. Once you sign the reverse mortgage closing documents, it can take three business days to receive your funds. You can borrow 40 to 60% of your home equity, but the actual amount you can get approved for may depend on your age, appraised home value, and interest rates.

The Reverse Mortgage Application Process

When you apply for a reverse mortgage, there are several steps involved in the application process. Here are the key steps involved:

Research

Doing prior research can help you figure out how much you are eligible to receive, reverse mortgage requirements, when funds will be disbursed, and the potential repercussions of reverse mortgages.

Some of the organizations that can provide information include the National Reverse Mortgage Lenders Association (NRMLA), which serves as a national voice of the reverse mortgage industry, and the U.S. Department of Housing and Urban Development (HUD).

Counseling

Before you can submit your application for a reverse mortgage, you must attend a counseling session with a third-party HUD-approved counselor to discuss your responsibilities when you take a mortgage and get answers to any questions you have. Once you complete the counseling session, you will be issued a counseling certificate, which you must submit to the lender.

Some reverse mortgages like proprietary and single-purpose reverse mortgages may not require borrowers to go through counseling.

Application

When applying for a reverse mortgage, you will be required to provide certain information such as your legal name, date of birth, Social Security number, homeowner's insurance, and proof of income. If you are still paying your mortgage, you will be required to provide a mortgage statement. Once you have provided the required information, the lender will begin the review process to determine if you qualify for a reverse mortgage and the mortgage terms you will get.

Appraisal

Once you have submitted the required documents, the application will proceed to the appraisal stage, and the lender will send an FHA-approved appraiser to determine the value of your home and verify that your home meets the HUD's minimum property standards. You will receive a call from the appraiser to schedule an evaluation of your home; the appraiser will conduct a thorough evaluation of the property to ensure it meets safety requirements.

Underwriting

When the lender receives the preliminary reports and inspections report, your file will be turned over to an underwriter to review your mortgage application. The underwriter must verify that you have met all reverse mortgage requirements, conduct a title search, and purchase title insurance. If you have unpaid liens or trusts, you will work with the lender to sort out any pending issues.

The underwriting process is done manually, and a disposition on your loan is issued to indicate whether your application was approved, approved with a condition, or denied for a specific reason. If the application is approved with a condition, it means that you will need to provide additional information before getting the final approval.

Closing

Once the mortgage originator completes the required approvals for your reverse mortgage application, the loan file will be deemed “clear to close”, and the transaction will move to close. The lender will also set the final closing date for the transaction.

Your originator will schedule an appointment at your preferred location or visit your home to review the closing documents to confirm the mortgage amount, interest rate, and other loan terms. If you have checked and confirmed the reverse mortgage terms, proceed to sign the closing documents. You will be given a copy of the mortgage documents.

Your lender is required by law to provide a 3-day right of rescission, which allows you some time if you decide to change your mind and cancel the loan application.

Funds disbursement

The lender will disburse the funds three days after you sign the final closing documents if it does not receive a cancellation notice. You can opt to receive the funds either as a lump sum payment, fixed monthly payments, a line of credit, or a combination of these options.

If you are using part or all of the funds to pay off the outstanding mortgage balance, the lender will send the loan proceeds to your mortgage company to pay off the unpaid loan and deposit the remaining loan proceeds into your account. 

Do you qualify for a reverse mortgage?

To qualify for a reverse mortgage, the basic requirement is that you must be age 62 or older. If your spouse is below this age, and their name is on the title, you may become ineligible to take a reverse mortgage.

You must also be a homeowner, and the property must be your primary residence. You must own the property outright, or have paid a substantial amount of your existing mortgage.

Before you are approved for a loan, you must show proof of income or assets that can help you meet the financial commitments related to your property such as property taxes, homeowner insurance, and homeowner association fees during the reverse mortgage term.

If you are applying for the federally-insured Home Equity Conversion Mortgage, you must participate in a counseling session provided by a HUD-approved reverse mortgage counselor. The counselor is trained to assess your financial situation, provide alternative options, and answer any questions you might have.