July 21, 2003, Revised December 2, 2006, October 15, 2007

The major steps in getting a reverse mortgage are deciding whether or not you want one, if you do, don't procrastinate but don't accept any uninvited solicitations, either. Educate yourself about the topic, explore state and local programs that might meet your needs, determine how much money you can draw on the national programs and what it will cost, get counseled, decide how you want to draw funds, and select a lender.

“I am running short of money and friends tell me that I should take a reverse mortgage, but the thought of a complicated transaction involving my house just terrifies me. It would help a lot if you would lay out the steps in 1, 2 3 form?”

With a reverse mortgage, it is as important to know what not to do as what to do. So let me start with that first.

Don’t Respond to Any Uninvited Solicitations

There are freeloaders about, some calling themselves estate planners, who would like to be paid for directing you to a lender, or to an insurance company selling annuities. You don’t need them, just follow the steps described below.

Don’t Procrastinate

Procrastinating on a reverse mortgage is easy because, unlike the situation when you took your first forward mortgage, you already have shelter and the children are grown and out. Fight the tendency by making an informed decision, which is selecting one of three options:

*A reverse mortgage is not for you.

*A reverse mortgage is for you, but it would be better to wait and allow the amount you can draw to rise, which it does as you age.

*A reverse mortgage is for you right now.

Yet a final decision should wait until you complete the next three steps at least.

Explore State and Local Programs That Might Meet Your Needs

Many states and localities have single purpose programs for seniors directed to property improvement or payment of property taxes. These programs are invariably good deals, but they usually have eligibility criteria that limit their availability. A good place to start looking for them is the directory of “homes and communities organized by state” on www.hud.gov.

Educate Yourself About Reverse Mortgages

Call AARP at 800 209 8085 for a free copy of Home Made Money, an excellent pamphlet on reverse mortgages. You can also order it online at www.aarp.org/revmort. Other good online sources are www.reverse.org, and http://www.mtgprofessor.com/reverse_mortgages.htm.

Determine How Much Money You Can Draw on the National Programs, and What it Will Cost

You do that using an on-line calculator at one of the following web sites: www.rmaarp.com, www.revmort.com, www.nrmla.org, or www.ffsenior.com. The first 3 cover the FHA Home Equity Conversion Mortgage (HECM), and Fanny Mae’s Home Keeper (HK) mortgage. The last one covers those plus the Financial Freedom Cash Account (CA) mortgage, which caters to high-priced homes (over $400,000). Based on these results, decide whether you want a reverse mortgage now, and if so, which of the 3 types.

Formulate a Preliminary Plan of How You Will Draw Funds

Will you take a line of credit, a monthly payment, or some combination? Also, formulate questions to be put to a counselor.

Get Counseled

Counseling by a HUD-approved counseling agency is mandatory, regardless of what kind of loan you select so use it as part of your education. You can find a counselor on your own by going to http://www.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm, clicking on your state, and selecting from among the agencies that list “HECM counseling”.

You can also find a counselor through AARP. When you order its free consumer guide, AARP sends you information on its counseling referral system. AARP encourages you to read the booklet before requesting counseling. If there is a possibility that you may select a Home Keeper or Cash Account mortgage, find your counselor through AARP.

Select a Lender

Select a lender who belongs to the National Reverse Mortgage Lenders Association (NRMLA). These lenders subscribe to a code of conduct that prohibits deceptive or sharp practices. The code, as well as a list of members by state, is available on NRMLA’s web site (www.reversemortgage.org ). Next to each NRMLA members is a notation of the types of loans they do. All do HECMs. Most do HECMs and HKs. A smaller number do CAs.