If you are considering doing a reverse mortgage, named a HECM, Home Equity Conversion Mortgage, then most likely you have weighed the pros and cons before proceeding.
In most cases the pros and cons are within your control, however, there are some realities that are no longer in your control or that of your local loan officer or lender.
There are two primary negatives when applying for a Reverse Mortgage.
First, all applicants are required to take HECM, reverse mortgage, counseling from an approved HUD reverse mortgage counselor. Reverse mortgage counseling is controlled by HUD and is a requirement for doing all reverse mortgages. Some borrowers are offended by this protocol, since it involves questions beyond that of the actual loan. Also, counseling takes time, but for the majority of the company you can take the counseling over the phone, which reduces your inconvenience. However, if you have hearing issues, I suggest you take your counseling in person.
Counseling can cost from $0-$125 depending on funds available from the particular agency you use for the counseling. However, as inconvenient as it may seem, HUD counseling is a good thing. HUD counseling was put into place to educate borrowers to make sure they fully understand the process of doing a reverse mortgage.
After the HUD counseling is completed, the next step is to get the underwriting process started. In most cases, the first step is getting the appraised value of the home. Getting your home appraised is done by third parties, called, AMC’s, Appraisal Management Companies. Your loan officer has no control over who will be chosen to do your appraisal. The appraisal process is put into the hands of a third party, not associated with the loan officer. The idea of having AMC’s was created to maintain an arms length approach between all parties. AMC’s are a requirement for all appraisals for borrowers wishing to purchase or refinance, be it a conventional or a reverse mortgage.
The appraisal part of getting a reverse mortgage can be the most painful. The reason is that most lenders require the appraisal fee be paid up front, since these fees goes directly to the AMC, not the lender. The appraisal fee is usually $400-$450 and cannot be ordered until the borrower has taken their HUD counseling. Borrowers should be advised the appraisal fee does not go to the lender. The challenge for both borrowers and lenders, is that no one can tell you how much your house will appraise, until a properly executed appraisal is completed.
Loan officers, lenders, and borrowers would like to see every home they submit for an appraisal will give them the value they believe makes the reverse mortgage make sense for their borrower.
The reality is that home values have been tremendously impacted since the financial implosion of 2008. We are starting to see some improvements in values and depending on your zip code, you can already see values rising, yet for some others, the road is still long to get back to where you were prior to 2008.
Final food for thought:
HUD counseling for reverse mortgages is here to stay and will continue to be a requirement for all HECM endorsed loans. Appraisals will continue to be a challenge for borrowers, but the good thing is that loans are still being done successfully every day. If you feel the current value for your home is in question, do some research to find out what comparable homes in your neighborhood have sold for within the last 12 months. This research will give you a good indication of your home’s value and assist you in making sure you qualify for a reverse mortgage.
Here at Delaware Financial Capital Corp. we are here to answer any questions you may have if you are considering a reverse mortgage. All you have to do is give us a call at 302-266-9500 or simply fill out the online form below:
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