The application process for a reverse mortgage generally takes about 30-45 days from start to finish and has five major steps. However, the longest part of the reverse mortgage process is the decision-making process that leads up to the application.
Homeowner(s) typically research reverse mortgages using resources such as this site for several months. Next they request information from a local reverse mortgage specialist. The homeowner may invest one to two months meeting with the specialist in person and reviewing the good faith estimate and other loan documents.
Step 1. Initial Application
The application legally authorizes the lender to begin the application process but the lender cannot incur any costs on your behalf until Step 2 (counseling) is completed. The application is not binding and can be canceled at any point during the process.
Step 2. Reverse Mortgage Counseling
Even if the application has been completed, the lender is not legally permitted to incur any costs on the applicant’s behalf (such as ordering the appraisal) until the applicant has submitted a signed HECM Counseling Certificate. This is proof that the applicant has completed the mandatory counseling session with a HUD-approved counseling agency.
Step 3. Appraisal
The appraisal establishes the legal value of the applicant’s property. The reverse mortgage appraisal must be conducted by an independent HUD approved appraiser (not all appraisers have this approval) and it must follow specific HUD guidelines. This means that even if a homeowner already has an appraisal, it will most likely have to be re-appraised.
Step 4. Underwriting
The Underwriter reviews all of the documentation and identifies conditions to be satisfied prior to closing related to any additional or missing items. Once the conditions have been completed, the final closing date can be set.
Step 5. Closing
The lender and the applicant set a closing date where a notary or attorney meets with the applicant to sign the final closing documents. Once the closing documents are signed, there is a three-day ”right of rescission” period. This means that even though the closing has taken place, the applicant can still cancel the loan with no penalty for three business days after the closing. The three-day “right of rescission” period does not apply to the HECM for Purchase Product.
Following the right of rescission period, the title company will issue a check or wire the funds to the borrower’s account. If the applicant was using the reverse mortgage proceeds to pay off an existing mortgage, the title company will also send the mortgage payoff amount to the lender.