Reverse Mortgage Appraisal Requirements

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    If you have already selected reverse mortgage as your trusted partner in the jungle of mortgage refinancing, it is a good time to discuss the steps involved in obtaining a reverse mortgage in detail. The steps involved in getting a reverse mortgage are explained in our easy little guide. Be prepared, and go much smoother in the process.

    COUNSELING

    The homeowner seeks guidance from an accredited HUD counseling service. Counseling is mandatory regardless of which mortgage reversal product you choose. Counseling is usually performed face to face or over the phone. The counselor offers additional reverse mortgage details, decides whether you are eligible to obtain a reverse mortgage, and addresses other solutions that may be available to assist with your daily living. A certificate to submit to the lender would be given to the homeowner as evidence they have been counseled.

    APPLICATION / DISCLOSURE

    The homeowner fills out the application for a loan and chooses the payment option: lump-sum payment, fixed monthly payments, credit line, or a combination of these. Lender discloses the approximate overall cost of the loan to the borrower. The lender may collect money for the appraisal of the home. Homeowner offers requested information to the lender, including photo ID, Social Security number verification, details on any current mortgage(s) on the house, and certificate of counseling.

    APPRAISAL

    An appraiser arrives at your house. The appraiser assigns the house value and decides the property’s physical condition. If the appraiser discovers structural flaws needing repair, the homeowner must employ a contractor to complete the repairs after closing the reverse mortgage.

    UNDERWRITING

    Upon receiving all necessary details and data, the lender finalizes the loan terms with the homeowner (i.e., deciding payment method, loan rate adjustment frequency) and submits the loan package for final approval to the underwriting department. At present, it can take 4-8 weeks (sometimes sooner) to complete a loan package underwriting.

    CLOSING

    Closing (signing) of loans is scheduled if the loan package is accepted. This measures initial and planned interest rates. Closing papers are planned, along with final statistics. Closing expenses are typically funded as part of the credit. Lender or Title Company has loan documents signed by their homeowners.

    DISBURSEMENT

    The homeowner has three working days to cancel the loan after signing documents. The loan funds are disbursed upon the expiration of this term. Homeowner accesses the funds in the form of selected payment option. Any remaining home mortgage is paid off. A new lien is imposed on the building. The homeowner can use the proceeds from the loan for any reason. The loan moves to servicing where the servicer disburses recurring payments to the homeowner over the life of the loan (if this option is selected), advances the line of credit funds upon request, receives any repayments on the line of credit, and sends out regular statements.

    REPAYMENT

    The homeowner makes no monthly mortgage payments to lenders over the loan period. The loan can stay active until the householder ceases to occupy the house as the principal residence. The loan can be repaid with or without a home sale by the homeowner or the heirs/estate. The required repayment is the lesser of the value of the home or the loan balance.

    You need to prepare your house, as it will be a full inspection. You must put your best foot forward because the inspection results will affect your loan application. It means getting the house and yard washed up well. You should be planning your home as though you were selling it to the appraiser because, actually, you are. Clean up the yard to give it the manicured and prepared look, note that it is the yard the appraiser first sees. Make sure the exterior of the house looks well kept; any paint update is an easy way to enhance your home look. The same applies to the interior of the room; it is in good condition that these walls are washed from the various stains they collect over the years and look at the ceiling. Make sure the house doesn’t get cluttered because this can make a house look really small.

    Don’t forget those often-overlooked places like the crawlspace. HUD requires that the space be clear of all debris and be properly vented. The appraiser will always be on the lookout for high humidity or water ponding. Another set of keywords to keep in mind is “future utility, durability, and economy of maintenance.” In this respect, the home’s roof structure must be sound and free of leaks. Attics and crawl spaces must be properly ventilated to reduce the degrading effects of excess heat and moisture.

    The bottom line: look around your house. Be as truthful as possible with yourself. If there are any conditions that could be seen as harmful to the occupants, any conditions that could lead to possible repeated and potentially could reduce maintenance costs or potential catastrophic structural failure; they will need to be fixed. If they are not replaced before the valuation, they will figure in the home’s value, and they will have to be fixed before the loan closes. While when applying for a reverse mortgage, you might not be selling your home, it is a good idea to treat the appraisal visit as though it were an open house.

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