Reverse Mortgage Application Process

The application process for a reverse mortgage generally takes about 30-45 days from start to finish and has five major steps. However, the longest part of the reverse mortgage process is the decision-making process that leads up to the application.

The average reverse mortgage applicant begins considering a reverse mortgage six months before completing an application. The homeowner passively researches reverse mortgages using resources such as this site for several months. They next request information from a local reverse mortgage specialist. The homeowner invests one to two months meeting with the specialist in person and reviewing the good faith estimate and other loan documents.

A site survey used during
reverse mortgage underwriting

Step 1. Intial Application

The application legally authorizes the lender to begin the application process but the lender can not incur any costs on your behalf until Step 2 (counseling) is completed. The application is not binding and can be canceled at any point during the process. The application will specify the reverse mortgage fees, interest rates, and loan amounts.

Step 2. Reverse Mortgage Counseling

Even though the application has been completed, the lender is not legally permitted to incur any costs on the applicant's behalf (such as ordering the appraisal) until the applicant has submitted a signed HECM Counseling Certificate. This is proof that the appliant has completed the mandatory counseling session with a HUD-approved counseling agency. The counseling can be completed before or after the initial application in most states.

Step 3. Appraisal

The appraisal establishes the legal value of the applicant's property. The reverse mortgage appraisal is a special one -- it must be conducted by an FHA-approved appraiser (not all appraisers have this approval) and it must follow a specific FHA format. This means that even if a homeowner has already has an appraisal, it will most likely have to be re-appraised.

Step 4. Underwriting

The lender will confirm the applicant's legal ownership of the property by conducting a title search and purchasing title insurance. They will also work with the applicant to clear up any issues with trusts, unpaid liens against the title, bankruptcies, etc. Once the lender has finished underwriting, the application's status will be changed to "clear to close" status. This means that everything has been completed and the final closing date can be set.

Step 5. Closing

The lender and the applicant set a closing date when a notary or attorney meets with the applicant to sign the final closing documents. This is the applicant's opportunity to review the closing documents to make sure that the interest rate, fees, and loan amounts are the expected amounts. Once signed, the application goes into a three-day "right of recission" period. This means that even though the closing has taken place, the applicant can still cancel the application with no penalty for three business days after the closing.

Immediately after this waiting period, the title company will issue a check to the homeowner (typically by overnight mail). If the applicant was using a reverse mortgage to pay off an existing mortgage, the title company will also send the mortgage payoff amount to the bank.