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. Note: Under legislation passed in 2008, originators of reverse mortgages are barred from offering any other financial products to customers for whom they are originating a reverse mortgage.
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 you prefer to wait and allow
the amount you can draw to rise 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. My site has many articles on the subject, you can see the list by going to my Library and clicking on Types of Mortgages, then scrolling down to Reverse Mortgages.
Determine How Much Money You Can Draw on the National Programs, and Select a Lender
You can usefully combine these steps. See How Do You Shop For a HECM?
Formulate a Preliminary Plan of How You Will Draw Funds
Will you take a line of credit, a monthly payment, or some combination? Read Which Reverse Mortgage Option Should I Choose?
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”. Alternatively, you can wait until you select a lender, who will give you a list of counselors in your area.