November 1, 2016 in Mortgages

Here is who will help you in the reverse mortgage loan process

Two of the first people you’ll meet if you’re interested in a reverse mortgage loan are Henry Winkler and Tom Selleck.

Popular TV commercials aside, before you enter into a home equity conversion mortgage, or HECM, agreement, you’ll need to seek out several people to help you through the process and help you determine whether a reverse mortgage loan is right for your situation.

If you have kids, you may want to have a family meeting. It’s a good idea to find out in advance what your kids’ expectations are, if any, for inheriting your home.

Whit Adams, a retiree in Gainesville, Georgia, met with her six adult kids. She and her husband had moved several times and, she says, “We sat them down and said, ‘We’re getting our reverse mortgage. (The house) will go to the bank.'” None of the kids minded. “They were glad we had a place where we are so happy.”

A trusted adviser, whether legal or financial, can be key to your decision. In fact, as more advisers and certified financial planners bone up on this strategy, chances are better that your adviser may suggest looking into it.

You may raise the topic if you’re exploring other options for retirement income, or your adviser may suggest it if it looks as if your plan has some gaps.

You must meet with a HECM certified counselor, says Don Graves, adjunct professor of retirement income at the American College of Financial Services in Philadelphia. It’s required by the Department of Housing and Urban Development, and most often can be done by phone.

“The third-party counselor is a great check-and-balance for the industry and for the consumer,” says Reza Jahangiri, CEO of American Advisors Group in Orange, California.

At the meeting, you’ll be given a rundown of pros and cons, as well as alternatives to getting a reverse mortgage loan. You’ll receive a projection of how much you can expect to receive, and you’ll be able to compare the payout terms that are available.

The counselor is required to do a budget with you.

This conversation can take place in person or by phone, and it aims to ensure you make the right decision. Typically, Graves says, it is several conversations.

Are you the sole decision-maker? Do you have adult children? Graves encourages enough talks to ensure full participation.

“(The reverse mortgage) is not meant to be a loan that you take out and refinance,” Jahangiri says. “It’s to help you age in place.” The lender should be willing to take the time to show you how a reverse mortgage loan fits your specific situation.

Lenders who are active in the National Reverse Mortgage Association are held to a code of ethics, which states in part, “Placing the needs of the borrower ahead of your own is central to the NRMLA identity.”

Once the loan is submitted, an appraiser from the Federal Housing Administration (FHA) is assigned and the homeowner pays for an appraisal. The cost can range from $300 to $600, according to Graves.

“The appraiser walks through the property and renders an opinion of its value,” Graves explains. The appraiser takes photographs and, Graves says, while you don’t need to make major repairs or repaint or renovate, you might want to imagine you’re expecting visitors. Tidy up.

Cosmetic issues, such as the stain from a water leak, typically won’t make a difference to the appraised value.

Any mortgage has a loan settlement, and the reverse mortgage loan is no different. Once the loan application is approved, you’ll meet with the title agent to sign and notarize closing documents. Depending on the state, signing the mortgage can take place with an attorney instead of a title agent.

The meeting can take place in your home or in an office. Most often, the lender attends this meeting, too. “I never miss a close,” says Joe Kurelick, a loan officer who covers the state of Georgia for American Advisors Group. The lender should confirm the payment plan — whether you’re receiving the loan in a lump sum or by fixed monthly payments or a line of credit.

Closing documents and final figures are prepared. Closing costs are normally financed as part of the loan, but you can pay any costs in lieu of financing, if you prefer.

Associated fees will include the title agency’s closing or prep fee, which is a cost of any loan closing.