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The Reversing Trend
By
Valerie Thelen, Staff Writer
Next, a homeowner must complete the
mandatory counseling already discussed. Those who’ve
made it past Steps 1 and 2 and still are considering a
reverse mortgage can find a HUD-approved counseling
agency. Counseling can be completed in person or by
phone. The association lists several counseling sites on
their Web site that the homeowner can contact.
The application is the fourth step in
the reverse mortgage process. If, after counseling, a
homeowner decides that a reverse mortgage is a good fit
for them, they must fill out a loan application and
select a payment plan. At that time, the lender tells
the homeowner the total cost of the loan and the
homeowner provides pertinent information on their
residence, such as deeds, etc.
The processing of the application is
next, in which the lender orders an appraisal of the
home and makes sure it meets FHA guidelines.
The lender then proceeds with
underwriting the loan, which can take four to eight
weeks for final approval. Then, as with a traditional
mortgage, there is a closing date. And, also as with a
traditional mortgage, many papers must be signed by the
homeowner.
The final two steps are disbursement and
repayment. The homeowner has three business days after
the closing date to cancel the loan. After that, it’s a
done deal. The funds are disbursed as agreed upon, any
existing debt is paid off and a new lien is put on the
home. No payments are made until the end of the loan,
when the homeowner ceases to live in the property.
Senior Protection
There are many safeguards in place today
to protect seniors enrolled in a reverse mortgage. These
are mandated by the FHA and help keep families out of a
big financial risk.
One of them is the counseling, already
discussed. Next is the standard and capped interest
rates, limitation on fees, advance disclosure of the
loan cost, and no maturity date. The latter means that
the loan cannot come due during the homeowner’s
lifetime. They have a lifetime right to occupy the home.
The loan can be repaid at any time
without any penalties, and in no event will the loan be
more than the value of the home.
Reverse mortgages are complicated
and full of new terms and guidelines. It’s important
that anyone considering this route learn all they can
and see if it is the best fit for them or their loved
one.
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