If you are considering a home equity conversion mortgage (HECM), you’ll need counseling before applying for the loan. Even if you have researched all of the requirements for this loan, counselingis mandatory to help you understand the implications of this mortgage and how they affect your financial situation.
In this article, we’ll look at how to find reverse mortgage counseling and what you can expect in the process.
What Is Reverse Mortgage Counseling?
Reverse mortgage counseling is required for homeowners considering a HECM — a reverse mortgage backed by the federal government. This mortgage is a complex financial product, so homeowners must complete counseling with an approved counselor.
By having a counseling session, homeowners can understand how the product works and assess whether it is the best solution for their financial situation. This is also known as FHA reverse mortgage counseling, as the Federal Housing Administration (FHA) insures HECMs.
Counselors must cover specific topics during the session, including reverse mortgage features and costs, tax and financial implications, and reverse mortgage scam education.
What Do Reverse Mortgage Counselors Do?
Reverse mortgage counselors have numerous responsibilities toward their clients.
Educate clients: The counselor must educate homeowners on the reverse mortgage, whether it is appropriate for them and what other financial options may meet their needs.
Provide guidance and resources: Homeowners need guidance from counselors to make an informed decision. Before your counseling session, the counselor should provide you with a pre-counseling informational packet containing a copy of “Preparing for Your Counseling Session,” a list of loan comparisons, a copy of the total annual loan cost, a loan amortization schedule showing the costs over the loan’s lifetime and a copy of “Use Your Home to Stay at Home” from the National Council on Aging (NCOA).
Understand clients’ situations: A reverse mortgage counselor must familiarize themselves with your financial situation and unique needs and discuss reverse mortgage products and other financial and social service housing options within the context of your situation.
How Do You Find a Reverse Mortgage Counselor?
You can find reputable and certified HECM counselors on the U.S. Department of Housing and Urban Development (HUD) roster. Once you find a counseling agency in your city, you can contact them via phone or online. You can also explore this list of agencies offering counseling services nationwide.
You’ll receive pre-counseling materials once you find an agency and book a session.
How Much Does Counseling Cost?
Reverse mortgage counselors can charge a fee that is both reasonable and customary. This fee is usually $125 to $150. Lenders cannot pay this fee for clients to ensure they remain impartial. If the cost is unaffordable, you can contact the counseling agency to request hardship approval, allowing you to pay a reduced rate.
The Department of Housing and Urban Development (HUD) authorizes counselors to waive the fee for homeowners who meet the following criteria:
Fall below 200% of the federal poverty level
Are delinquent on their mortgage
Have defaulted on their debt
Are experiencing homelessness
What to Expect During Reverse Mortgage Counseling?
A reverse mortgage counseling session typically takes one hour. Even after your session, your advisor will continue to support you. During the meeting, you can expect to discuss the following:
Your financial needs and situation: The counselor will assess your finances to determine if you can meet the loan obligations, such as continuing to cover home insurance and property tax. They’ll also evaluate your financial needs to establish whether a reverse mortgage is the best option to meet them.
Features of a reverse mortgage: You’ll discover the reverse mortgage’s features like requirements, interest rates and how to access payments.
Your responsibilities when you have a reverse mortgage: The instructor will help you understand the obligations you must meet once you receive the reverse mortgage.
Costs of a reverse mortgage: You’ll learn about various reverse mortgage costs, such as origination, appraisal, title search, inspection, recording and survey fees. Other charges include mortgage insurance premiums, credit checks and mortgage taxes.
Reverse mortgage financial and tax implications: An advisor can help you calculate the loan’s cost, including interest, tax and other charges. They’ll also discuss applicable penalties.
Alternatives to a reverse mortgage loan: Your counselor will discuss relevant alternatives you can consider before deciding to apply for a reverse mortgage.
Reverse mortgage scams and financial elder abuse: The advisor will empower you with the knowledge to avoid dishonest reverse mortgage programs.
Initial application: You will complete an initial application with a lender. The application will detail necessary information such as the fees, interest rates and loan proceeds. You can still cancel the application at any point in the process without penalty.
Reverse mortgage counseling: You will then have a counseling session with a federally insured counseling agency to decide if it is the right option.
Counseling certification: After counseling, you will meet with a notary to sign a certificate stating you completed reverse mortgage counseling. Then, you will complete other paperwork, such as documentation of income, assets, credit history and additional liens.
Appraisal: You need a home appraisal when you submit your documentation, counseling certificate and signed application. An appraiser may also take pictures of your home, measure the square footage and examine recent renovations and maintenance.
Underwriting: The appraiser will then hand the report to the underwriter, who will analyze your credit risk. If there are any issues, the underwriter will work with you to help you correct them.
Closing: Once you have loan approval, you will have a date scheduled to close the loan with an attorney or title agent. At this stage, you sign the final documents for the reverse mortgage loan.
Funding: In the final step of the process, you will authorize the loan application. You can receive the funds as a lump sum, monthly payments or credit.
Frequently Asked Questions
Here are answers to additional questions about reverse mortgage counseling:
Who Needs to Participate in Reverse Mortgage Counseling?
All the people on the house deed must undergo counseling to understand the financial implications of the reverse mortgage. FHA also recommends guiding ineligible spouses or spouses under 62 years of age.
Is There Free Reverse Mortgage Counseling?
A few nonprofit organizations provide free reverse mortgage counseling.
Why Is Reverse Mortgage Counseling Required?
Talking to a counselor allows you to understand the responsibilities and implications of a reverse mortgage and make informed decisions. Since the mortgage will affect heirs, having all the information for proper planning is essential.
When Will I Receive My HECM Counseling Certificate?
You’ll receive the certificate immediately after completing the guidance sessions.
How Far in Advance Can I Book My Counseling Appointment?
Schedule the appointment at least one week in advance.
Why Trust Us to Provide Reverse Mortgages?
Senior Lending Corporation’s reverse mortgage products provide peace of mind when funding retirement. We use a supportive and empowering approach by assigning you a dedicated, highly trained, licensed advisor to guide you throughout the process. Your advisor will recommend a product that meets your needs, explain it in detail and answer all your questions.
We have helped many clients fund their retirements using this approach, and they say they’d highly recommend us. They have appreciated our advisors’ assistance, knowledge, professionalism, responsiveness, thoroughness, patience and friendliness.
Our decades of experience and ability to support and empower you allow us to make a difference in your retirement. We aim to understand what you want and deliver it honestly and effectively.
Speak to Florida Reverse Mortgage Consultants at Senior Lending Corporation
A reverse mortgage loan is a fairly complex financial product, which is why counseling is essential to help you make an informed decision.
Have questions about reverse mortgage counseling requirements or other parts of this process? At Senior Lending Corporation, our expert team is here to help you every step of the way. Reach out to us at 800-822-1190.
