The process of getting a reverse mortgage in California is much simpler than you may think. View the step-by-step processes below or better yet contact Loan Officer Marcel Garcia:
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The Process of Getting a HECM / Reverse Mortgage Loan
Awareness
You may have heard about the reverse mortgage loan on TV, on the radio, online, by receiving a mailer, or you did your own research.
Education
Meeting with a qualified Mortgage Loan Originator is key. This is where you learn about your specific numbers, what you might qualify for, and receive an analysis of your particular situation.
Counseling
Counseling is required from an independent third-party, HUD-approved counseling agency, for all reverse mortgage borrowers. Typically this fee is paid by the borrower. Consult with your Reverse Mortgage Loan Originator and make sure you complete this as soon as possible. Many times counseling can be completed over the telephone. You will receive two certificates; one to keep and the other to send to our office.
Action / Application
Meet with your Mortgage Loan Originator and decide if a reverse mortgage is right for you. Our reverse mortgage professionals may meet with you at our office, your home, or by phone to help guide you through the application. You will be left with a complete copy of ALL the documents for you and your trusted financial advisors (i.e. CPA or attorney) or family member(s) to review.
Financial Assessment
To help ensure the long-term success of the HECM loan over time, HUD requires a financial review of each applicant’s credit history, property tax payments and other credit factors that will be evaluated to measure a borrower’s willingness and financial capacity to meet the ongoing obligations of the loan.
The Appraisal
Upon receiving your HUD counseling certificate we will contact you to arrange for an appraisal of your property. The appraisal is paid by the borrower. Reverse mortgages use a full FHA appraisal. The value of your home is based on what comparable properties in your neighborhood have sold for recently.
Processing
The lender will begin to process your paperwork. This process includes the appraisal, title report, and checking the balance of any liens/mortgages to be paid. Also, verification of income and other credit factors are gathered at this time. We will be in contact regularly during this time.
Underwriting
When the processing and all paperwork is complete, we forward your file to the loan underwriter to determine if the loan will be approved and will work to satisfy any conditions/requirements needed to close the loan.
Closing & Funds Disbursed
If your loan has been approved by underwriting we will contact you to arrange for the signing of your final loan documents. At this time we will confirm your payment plan or partial lump sum (how you want to receive your money). Once you’ve signed the closing documents you have three business days to cancel the loan if you should choose to do so. After the cancellation (rescission) period has passed, your funds are distributed based on the payment option you chose at closing. HECM for Purchase loans do not have a rescission period. See HECM for Purchase Guidelines for more information.
Disclosure
This material is not provided by, nor was it approved by the Department of Housing & Urban Development (HUD) or by the Federal Housing Administration (FHA). It is not intended to be a substitute for legal, tax or financial advice. Consult with a qualified attorney, accountant or financial advisor for additional legal or tax advice.
*There are some circumstances that will cause the loan to mature and the balance to become due and payable. The borrower(s) must continue to pay for property taxes and insurance and maintain the property to meet HUD standards or risk default. Credit is subject to age, minimum income guidelines, credit history, and property qualifications. Program rates, fees, terms and conditions are not available in all states and subject to change.
Reverse Mortgage Myths and Facts
Myth: You immediately sign over ownership to your home.
Fact: You retain title to your home as long as you meet the loan guidelines and requirements such as: maintaining the property, paying all property charges such as property taxes, homeowners insurance, flood insurance, and homeowners association dues (if applicable), and avoiding extended absences from the home longer than six months.¹ As with any other mortgage, a lien is placed on the property to secure future repayment of the loan.
Myth: If you take out a reverse mortgage loan your children won’t be left with any of the home equity.
Fact: While the amount of equity typically decreases over time with a reverse mortgage, it doesn’t mean there will be no equity left when the last borrower dies. There are several factors that go into how much equity will be left, such as home appreciation, length of the loan, and optional monthly payments. There can still be equity left for your children.
Myth: Your children will be responsible for repaying the loan when you die
Fact: A reverse mortgage is a non-recourse loan, meaning that the lender can only be repaid from the proceeds of the sale of the home and not more than the value of the home. That means even if the home decreases greatly in value, the maximum repayment amount can only be up to the value of the home. While your heirs will not be responsible for the loan repayment, they will still have the option to refinance the loan to purchase it for themselves.
Myth: A reverse mortgage requires that you make monthly mortgage payments.
Fact: While you can choose to make mortgage payments, they are not required with a reverse mortgage. The borrower is still responsible to maintain the property, pay property taxes, homeowners insurance, flood insurance, and homeowners association dues (if applicable).¹
Myth: You must have your first mortgage paid off before you can qualify for a reverse mortgage.
Fact: While any debt on your home’s title must be paid off at closing and you must have adequate equity in the property, it is not required that you own your home “free and clear” before getting a reverse mortgage.
Reverse Mortgage Myths and Facts
Myth: You are not allowed to sell your home if you have a reverse mortgage.
Fact: You can sell your home if you wish and – just like any other mortgage loan – you must pay off the reverse mortgage at closing. There are also no prepayment penalties if you choose to pay off your loan early or make loan payments.
Some Additional HECM Loan / Reverse Mortgage Loan Facts
Many retirees use a reverse mortgage.
A reverse mortgage allows older homeowners to access a portion of the value of their home.
A reverse mortgage is a specialized loan for homeowners 62 and older.
A reverse mortgage is eligible only for the borrower’s primary or principal residence.
Reverse mortgages that are FHA-insured (Home Equity Conversion Mortgages) are insured by the Federal Housing Administration providing protection for both borrowers, lenders and beneficiaries.
HUD counseling (from an independent HUD-approved third-party counselor) is required prior to the borrower incurring any costs associated with the loan.
The cash or proceeds you receive from a reverse mortgage typically are not subject to individual income taxation. However, we suggest you consult your tax advisor to provide guidance for your particular situation.²
It is not a government grant, but a loan that is repaid in the future when the home is sold, the last borrower dies or permanently leaves their residence, or the loan terms are not complied with.²
Reverse mortgage proceeds could affect government needs-based programs such as Medicaid and Medi-Cal. Those receiving such benefits should consult a professional before obtaining a reverse mortgage.
A reverse mortgage loan is secured by a mortgage on the home and failure to comply with loan terms could result in foreclosure.
It’s a specialized loan. However, program rates, fees, terms, and conditions are not available in all states and are subject to change.
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