How many days can a reverse mortgage application be taken after counseling?
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Although you should do your homework and ask a lot of questions to try to get the best deal when buying a home, car or another big-ticket item, the amount of effort you put into your task is entirely up to you. Your due diligence is optional. Show
That’s not so when you’re thinking about taking out a reverse mortgage to help you retire better. You will undergo required reverse mortgage counseling to ensure that you know what a reverse mortgage is and what your obligations are when you have one. In fact, before you can formally apply for a Home Equity Conversion Mortgage (HECM) or incur any fees, you must first undergo an in-person or over-the-phone counseling session (whichever is more convenient for you) conducted by an independent third-party counselor approved by the U.S. Department of Housing and Urban Development (HUD). Reverse mortgage counselors have many responsibilities. To start, they will explain what a reverse mortgage is and how it works, carefully covering the loan’s costs, benefits, drawbacks and other financial implications. They also will help you compare a reverse mortgage with other possible home equity solutions, such as the sale of your home. In addition, they will review what you’ve been told by your lender to ensure the information you have received is accurate and truthful. What Happens Before Reverse Mortgage Counseling?You can obtain a list of independent counselors on your own by contacting HUD by phone (800-569-4287) or online at https://entp.hud.gov/idapp/html/hecm_agency_look.cfm/hecm_agency_search.cfm. Your lender can also provide you with a list. If they do, the list must contain the names of at least five local counseling agencies, along with their accompanying toll-free numbers. Only you can make the appointment. The lender can’t make it on your behalf. Nor can your lender participate in your counseling session. One more important consumer protection to note: whether or not you select a reverse mortgage, your counselor does not receive a commission or bonus. They have no sales role whatsoever! After making your appointment, your counselor will confirm the appointment. If your lender hasn’t done so already, the counselor will send you an information packet full of materials to further prepare you for your upcoming session. This information packet must include the following materials:
What Happens During Reverse Mortgage Counseling?The counseling protocol also requires that a counselor explain and review alternative options and reverse mortgage information, such as:
The protocols further require that a counselor discuss fraud prevention and educate consumers on how to protect themselves. Although not required, other family, friends, and trusted advisors, like an accountant or attorney, can participate in your counseling session at your request. Including family members in the process can make both you and them feel more confident about the decision you reach. What Are The Reverse Mortgage Counseling Costs?The cost of the counseling typically ranges from $125 to $200. Lenders are not permitted to pay this fee for applicants. This is one more safeguard to ensure the impartiality of the counseling process. Homeowners can also contact the counseling agency to request a “hardship” approval to pay a reduced fee. A reverse mortgage allows eligible homeowners to leverage their home equity for retirement income, without being obligated to make monthly loan payments to a lender. To qualify, there are different approval requirements that homeowners need to meet, including—if you get a government-backed home equity conversion mortgage (HECM)—the completion of reverse mortgage counseling. If you’re considering a reverse mortgage, it’s important to understand what this counseling involves and when it’s necessary. Key Takeaways
What Is a Reverse Mortgage?A reverse mortgage is a special type of financial arrangement in which a homeowner is able to take equity out of their home. But unlike a home equity loan or a home equity line of credit (HELOC), the homeowner is not required to make any monthly payments to a lender. Instead, a reverse mortgage becomes payable when the homeowner sells the home, moves out, or passes away. The aforementioned HECMs are reverse mortgages that are insured by the Federal Housing Administration (FHA). Homeowners may be eligible for an HECM if they:
Married homeowners can add their spouse as a co-borrower if they’re age 62 or older. If they’re not, a spouse can still be added as an eligible non-borrower. Homeowners who take out a reverse mortgage, including an HECM, can expect to pay closing costs and interest to the reverse mortgage company. Interest and fees can increase the reverse mortgage balance that’s eventually due. HECMs also require borrowers to pay both an up-front and an annual mortgage insurance premium (MIP). Reverse Mortgage Counseling FactsReverse mortgage counseling is required for homeowners who are interested in getting an HECM. This counseling must be completed with a counselor approved by the U.S. Department of Housing and Urban Development (HUD). If you’re considering an HECM, here are some things to know about reverse mortgage counseling. 1.. Counseling Must Be Completed Before Signing a Loan ApplicationHUD requires homeowners to complete reverse mortgage counseling before they even apply for a reverse mortgage. This stipulation exists to ensure that homeowners fully understand how reverse mortgages work and the financial responsibilities that they convey. It’s also important to note that the homeowner, not the reverse mortgage lender or the federal government, is responsible for scheduling a session with an approved counselor. 2. Homeowners Must Receive Pre-Counseling MaterialsBefore you sit down with an approved reverse mortgage counselor, you must first receive an informational packet. The counselor with whom you choose to work should provide you with the following:
If your counseling session is approaching and you haven’t yet received these materials, it’s important to reach out to the counselor to get the packet. 3. Counseling Can Be Completed in Person or by PhoneYou have the right to choose either an in-person or a telephone meeting when scheduling a reverse mortgage counseling session. The material covered during the session will be the same and includes a discussion of:
HUD maintains an online database of reverse mortgage counselors who offer in-person and phone meetings. 4. Reverse Mortgage Counseling Fees May ApplyHUD authorizes approved reverse mortgage counselors to charge fees for their services. Reverse mortgage counselors can set fees that are “reasonable and customary,” though the fee cannot exceed a level commensurate with the counseling services received. A typical reverse mortgage counseling fee may be $125 or more. HUD authorizes the waiver of reverse mortgage counseling fees for homeowners who are:
5. Completing Counseling Doesn’t Guarantee Approval for a Reverse MortgageCompleting reverse mortgage counseling by itself doesn’t guarantee that you’ll be able to get an HECM. If your counselor believes that you don’t fully understand the financial implications of a reverse mortgage or your obligations, they can withhold your counseling certificate. You may need to attend additional counseling sessions before you can obtain the certificate. An application for an HECM can’t be completed without this certificate. And even when you have one, a lender may still deny your application for an HECM if you lack financial resources to cover basic homeownership costs or you’re behind on federal debt. Why is counseling required for a reverse mortgage?Reverse mortgage counseling is required to ensure that homeowners understand the financial responsibilities involved as well as the potential risks. Homeowners cannot be approved for a home equity conversion mortgage (HECM) without first attending approved reverse mortgage counseling. What is HECM counseling?HECM counseling is reverse mortgage counseling for homeowners who are interested in an HECM. During an HECM counseling session, the counselor will discuss the homeowner’s financial needs and situation, the costs of a reverse mortgage and how it works, and what responsibilities are conveyed to the homeowner and/or their heirs for repaying the reverse mortgage balance. What are the requirements for a reverse mortgage?To apply for an HECM, homeowners must be age 62 or older and either own their home outright or have paid down most of the mortgage. They cannot be delinquent on any federal debt and must have financial resources to pay for property taxes, homeowners insurance, homeowners association (HOA) fees, and other costs. And borrowers must complete approved reverse mortgage counseling. How many housing counseling agencies must be provided to the borrower before accepting a final and complete reverse mortgage application Arizona?Borrower Choice
A few states specify a minimum number of reverse mortgage counselors that a lender must provide a prospective borrower for him or her to choose from, namely: 1. Arizona - at least five counseling agencies, including at least two that are authorized to provide counseling by telephone (Ariz. Rev.
Can you change your mind on a reverse mortgage?1. Use Your Right Of Rescission. Reverse mortgages have a 3-day period directly after you close on your loan in which you can cancel the transaction with no penalty. This is known as the right of rescission and it allows you to change your mind should you have buyer's remorse right after you sign the closing documents.
How easy is it to get a reverse mortgage?Reverse mortgages have two primary qualification criteria—you must be at least 62 years old and you must own a significant amount of equity in your home. While the specific percentage of equity required varies across lenders, typically you'll need 50%.
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