So, How Does a Reverse Mortgage Work?
You had the initial consultation with a New Mexico Reverse Mortgage professional about your situation and you’ve decided to begin the process. Naturally, you now want to know about the process and the work involved in completing the Reverse Mortgage throughout the next few weeks.
1. Talk with us, go to counseling and sign an application package:
Your New Mexico Reverse Mortgage expert will review your particular circumstances to help you decide which program best suits you, based on your lifestyle, financial needs and retirement goals. We will expand your knowledge base and provide you with numbers, charts and reference materials specifically prepared for you.
Thus armed with a solid understanding of the program and accurate numbers, you are ready for the HUD required counseling session!
The U.S. Department of Housing and Urban Development (HUD) requires that all applicants receive third-party counseling to explain the available options and details of a Reverse Mortgage. We provide you the best list of counselors available for you to choose from. Typically you pay a fee (regulated by HUD and no greater than $125) to a non-profit organization. The counseling session typically takes over an hour, but at the end you will be issued a Certificate. This important Certificate needs to be faxed to New Mexico Reverse Mortgage at (505) 897-0600. A list of counselors and more information can be found here.
New Mexico Reverse Mortgage will complete an application package with you, a process that generally takes only about 10 minutes. We will then schedule an appointment to get your signatures on a variety of papers that constitute the Application Package. At that time, we also would also need copies of the following:
- Signed Counseling Certification
- Valid State issued ID or Driver’s License
- Social Security Card (other documents can be used as a supplement)
- Most recent mortgage statement(s), if any
- Your Homeowner’s Insurance Agent’s contact information or Insurance Declarations Page
- Any old Title Insurance Policy
- A valid Survey (or Inspection Location Report) – providing us a copy will safe you $250 to $550
- Revocable Trust document (if applicable)
- Other items may be needed on a case-by-case basis
After signing the application package, we are ready for the next step.
2. Title Work and the Appraisal Inspection
After you sign the application package, we enlist the services of a Title Company to do the title search and create the binder. At the same time we place the order for the home to be inspected and appraised. Please inform us in advance of any concerns or issues regarding the title or a specific appraiser with whom you have had a negative experience in the past, so that we can address such issues proactively.
The appraisal must be ordered through an Appraisal Management Company (or AMC), and you must pay the appraisal fee upfront. This AMC will assign an FHA Certified Appraiser to inspect and place a market value on your property. Appraisals are typically charged upfront to your credit or debit card. Depending on the location of your home and other factors, you may pay more, but in the Albuquerque Metro area a typical appraisal costs about $475. On your behalf, we will place the appraisal request to a certified AMC system. An FHA licensed, independent appraiser will be assigned by the AMC, who will call you to schedule a time and date to inspect, measure and take photos and notes of your home. The mortgage companies and loan officers have little or no communication with the appraiser.
(New Mexico Reverse Mortgage does not earn a fee, set the prices or get a choice as to which appraiser is assigned to your home, due to recent regulations forbidding lenders to choose an appraiser of their choice.
3. Underwriting and Closing
After the appraisal and title work is complete, New Mexico Reverse Mortgage submits the loan to the lender’s underwriting department where all the documents are reviewed and finalized. The Underwriter has the final say as to the home value used to calculate the Loan.
We are then issued a “Conditional Approval”, which lists outstanding conditions that must be fulfilled before the loan is deemed clear to close. The majority of these conditions will be satisfied by New Mexico Reverse Mortgage internally and without needing your assistance. Occasionally, we will need your help to resolve some conditions that we simply cannot satisfy without your input, such as the submission of documents to which you alone have access.
Occasionally, the Underwriter will require either a “desk” or “field” review of the original appraisal. These reviews are required at their discretion and are used to verify that the original appraisal they were presented with is acceptable. A Desk or Field Review may delay the closing by a week or more.
Once we have satisfied the Underwriter’s Conditions, we are issued the “Clear to Close” and it’s time for closing! From the time New Mexico Reverse Mortgage received the Counseling Certificate to the date of Closing, on average 4 or 5 weeks have elapsed. The process varies depending on a variety of circumstances, including the location and uniqueness of your home.
At closing, you will sign all the final documents, most of which are similar or identical to the papers you signed in your initial application package. You may find that the Closing process is simply a review of information they already acquired. However, these are the final documents so if you have questions, be sure to get clarification.
Generally, the closing takes place at the Title office. However, if that is not convenient or possible, arrangements can be made for the Escrow Officer or a Notary to meet you at your home. Depending on the situation and location you may have to pay a fee for that extra service.
Before disbursement of funds, there is a required three-day “Right of Rescission” period that must be observed. This is a period during which you can choose to cancel the transaction. On any type of refinance (forward or reverse) on a primary residence, Federal law requires the lender to wait three business days before we disburse your funds.
After the loan is “Funded”, you then have access and may use the money however you wish.
4. Repayment
For the life of the loan, you do not need to make a monthly mortgage payment. However, you will remain responsible for the payment of taxes, insurance, and maintenance. Reverse Mortgages are due when the borrower no longer occupies the home. If death of the borrower occurs, the heirs/estate may repay the loan from the sale of the home or refinance the home.
While you clearly understand how the reverse mortgage program works, your heirs may not be as well-versed on the subject. So, when the time comes, they can contact New Mexico Reverse Mortgage and we’ll help them as to what steps they should take. For this and other reasons, when you choose New Mexico Reverse Mortgage to assist you with your loan, our job may be completed at time of closing, but our relationship with you is for life.
