By visiting the websites, you must start the reverse home mortgage learning process. Most of the time a loan officer comes to the home to explain the benefits of a reverse home mortgage to the homeowner and family or friends. Any questions are answered at this time. If the homeowner has already had HUD counseling OR is ready to proceed with the process, an application is completed.
Counseling by a HUD approved counselor is required. This can be taken as a first step or after the application has been completed. HUD counseling can be done via the telephone or at a fixed location. HUD counseling typically lasts from 45 minutes to one hour. The HUD counselor will sign and date a HUD Counseling Certificate at the conclusion of the meeting. The borrower(s) then sign and date the HUD counseling certificate and give it to their Loan Officer to start the loan process.
The loan officer takes the application before or after HUD counseling. The loan officer carefully explains the Reverse home mortgage program features and benefits. Some of the forms are :
The loan officer will collect copies of :
When both the application and HUD counseling have been completed, you are ready to start processing the loan. The next step is to order a HUD appraisal and a termite inspection. If either report reveals things that require fixing, according to HUD guidelines the borrower can fix these within six months after the close of escrow. If there are repairs required, a separate “Repair Set Aside” account is created. Fire insurance is required. In some cases the current policy may be less than the lender requires and therefore it is necessary to increase the insurance policy to the current value.
When the loan documents are ready to be signed, the loan officer will schedule a convenient time to come to your home (with the notary) to go over the documents and sign and date the loan papers. There is a three day right of rescission and the funds are disbursed on the seventh business day after signing. Typically, if you choose to have monthly payment, the funds are wired to your account on the first day of every month. If you choose a credit line, the funds are wired within five business days of receiving the request in writing. Partial or total lump sum payments will be received seven business days after close of escrow.
You must continue to pay property taxes and insurance. You must also maintain your home in good repair. Any repairs that are required must be done within six months of the close date. Proof of required repairs must be sent to the Lender.
You have to approach a housing finance company or a bank and express your interest in pledging your home for the reverse mortgage scheme. The HFC will assess the value of your house and, depending on your age and the prevailing interest rate, the amount of loan payable to you will be decided upon.
The value of the house will be determined by independent valuation through the generally accepted property valuation methodology in the industry. The loan amount will be fixed on the basis of current value and not on possible future appreciation. "There would be a provision for periodic valuation and consequent adjustment of payments," says Sridhar.
However, the most critical factor in deciding the amount is age. The older you are, the chances of getting a higher value are more. "This is because the lender will have to typically provide the loan for a lesser number of years," says Sridhar.
The interest rate at which the loan will be given will typically be marginally higher than the prevailing interest rates as the lending company will receive its money when the borrower dies. However, currently on the basis of present actuarial analysis, the loan to value ratio is fixed at 45-60 per cent of the value of the property based on the age.
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