Taking a reverse mortgage requires multiple steps, including counseling, appraisals, closing documents, and funding. The typical reverse mortgage takes 30 to 45 days from start to close. For much of that time, the lender verifies information and prepares loan documentation. Borrowers can speed the reverse mortgage process on their end by acting quickly to provide required information and documentation and answer any questions their lender may have.
Here’s a general timeline of what you can expect during the reverse mortgage process.
1. Third-Party Counseling
Expected Timeframe: Lead-Time to Appointment, Plus Several Hours
Anyone who wishes to apply for a reverse mortgage must attend a third-party counseling session. The counseling is with an independent third-party counselor approved by the U.S. Department of Housing and Development (HUD), who has a conversation with the potential borrower about the reverse mortgage responsibilities.
This session is a deep dive into responsibilities regarding the loan and an invitation to ask any questions or clear up confusion about the process. Once you finish counseling, you will receive a certificate of completion that makes you eligible to apply for a reverse mortgage.
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2. Complete and Submit the Application
Expected Timeframe: A Few Hours
To complete a reverse mortgage application, the borrower will need to provide documentation verifying the date of birth, proof of income, social security income, homeowner’s insurance, and a mortgage statement, if necessary. The lender may also collect other information to determine whether the borrower meets the eligibility requirements of maintaining the home and paying home association dues and property taxes. The lender will run a title check on your home to ensure no federal liens are present. During the application process, borrowers pursuing a variable rate reverse mortgage can decide whether to receive loan proceeds as a lump sum, monthly payments, line of credit, or a combination of these options.
The borrower can speed up this process by having their documentation ready before they begin the application. Information collection can take up to a few hours on the lender’s end.
3. Home Appraisal
Expected Timeframe: Up to Four Weeks
The lender will conduct an appraisal to determine how much you can borrow for the loan. The home’s appraised value, the age of the youngest borrower, and the interest rate determine how much you can borrow.
The appraiser will walk through the home to determine if it meets HUD’s minimum property standards. They will then create an appraisal report that they submit to the lender.
Setting up an appraisal could take up to four weeks, depending on the geographic area and the appraiser’s availability. The appraisal itself takes several hours, but the turnaround time to get the report to the lender will take longer.
4. Underwriting
Expected Timeframe: One to Five Days
Once the appraisal is complete, underwriting will receive your loan file. The underwriter reviews the submitted paperwork to determine all requirements are met to approve the loan. The reverse mortgage underwriter issues a disposition, a decision on whether the loan is approved, approved with conditions, or denied for a particular reason. Additional documents may be required if approval is conditional.
Once underwriting has completed its process, the loan is marked clear to close. Underwriting approves the closing documents to be drafted by the closing department. The closing department will send the final documentation to the title company, which will schedule the closing date and send the documents to the notary.
5. Loan Closing
Expected Timeframe: One Hour to Sign Documents
The borrower must sign loan documentation and paperwork to accept and “close” the loan terms. Usually, a notary is sent to the borrower’s home with the closing documents. With the notary, the borrower can review these documents and check that the loan amount, fees, and interest rate match what was discussed. They will sign the documents to indicate agreement with the terms, and the notary will stamp the papers with an official seal. Loan proceeds disbursement is confirmed at closing too.
6. Right of Recission
Definite Timeframe: Three Days
After closing, the borrower can change their mind and withdraw from the reverse mortgage. From the closing date, the borrower has three days to let the lender know if they don’t want to move forward.
7. Receive Fund Disbursements
Definite Timeframe: Three Days After Closing
The lender will distribute loan proceeds three days after closing. The lender will wire the funds to the closing attorney or title company, which will be disbursed to the borrower on the fourth business day. Current mortgages or liens on the property designated to be paid with loan proceeds will also be paid then.
Once the loan has closed and proceeds have been disbursed, the loan moves to servicing for management. At any point after funding, borrowers can direct questions or concerns to their servicer.
Seniority is published by Finance of America Reverse LLC. The views expressed in this publication are those of the author alone and do not necessarily reflect the views and opinions of Finance of America Companies. This article is intended for general informational and educational purposes only and should not be construed as financial or tax advice. For more information about whether a reverse mortgage may be right for you, you should consult an independent financial advisor. For tax advice, please consult a tax professional.
