Before applying for reverse mortgage, it is important to take some time to get to know about reverse mortgage — how it works, the benefits of reverse mortgage, and the downside of reverse mortgage. Consumers who are misinformed or know little about reverse mortgages can easily get influenced to buy other products and services that will only add to costs. This article will provide some helpful information on how to get reverse mortgages.
Step #1: qualification
Before even thinking of reverse mortgage lenders offering the loans with lowest rates, homeowners should first check if they qualify for reverse mortgages. To qualify for reverse mortgages, the applicant must be at least 62 years of age and own a single-family home, a 2-4 unit property, a townhouse, or a condominium. Some reverse mortgage lenders may have their own set of criteria for qualification as well.
Step #2: finding a reverse mortgage lender
There are a number of ways to go about finding a reverse mortgage lender. One of the best ways is to ask for referrals from friends and relatives who have gotten reverse mortgages before. Another option is to use the Internet to look for online mortgage companies that offer reverse mortgages. Perhaps the safest and most secure way of finding reverse mortgage lenders is to check the list of approved lenders from the US Department of Housing and Urban Development (HUD). Do not just settle for the lowest rate, but try to find a lender that is trustworthy, transparent, and follows HUD-approved guidelines.
Step #3: undergoing HUD-approved counseling
In an attempt to aid consumers in making sound financial decisions, the HUD requires homeowners to undergo counseling before getting approved for reverse mortgages. The counseling is aimed at giving homeowners a better picture of what a reverse mortgage is, how it works, the benefits of a reverse mortgage, and the downside of a reverse mortgage. During the counseling, homeowners are also advised on whether or not a reverse mortgage would be best for their current situation.
Step #4: choosing a reverse mortgage plan
Those who apply for reverse mortgages can choose one of four reverse mortgage payments plans. Here are the most common plans that specify how the reverse mortgage lender will pay the homeowner:
- Lump sum payment – Lenders pay the entire amount of the reverse mortgage in one go.
- Periodic payments – Lenders pay the homeowner on a monthly basis.
- Line of credit – Lenders fund a line of credit that homeowners can tap at any time.
- Combination – Homeowners can choose any combination of the other three payment schemes.
After choosing the plan all that is left is to finalize the deal. Be sure to read all of the information stipulated in the contract or in any other important forms before signing.