The reverse mortgage includes a wide assortment of paperwork and expectations that borrowers will have to complete before they can acquire this type of loan. Among these expectations, the reverse mortgage counseling and appraisal steps in the reverse mortgage process are very important for borrowers to understand. Today, we’ll be exploring each of these topics in depth and providing informative details on each one.
Reverse Mortgage Counseling
Because reverse mortgages are such complex financial tools, the government has decided that, in the best interest of potential borrowers, they should know exactly what they are getting into before completing the reverse mortgage process. To accomplish this, all prospective clients must first meet with an independent, third-party counselor approved by the United States Department of Housing and Urban Development (HUD). Keep in mind that once the counseling session has transpired, you will have 180 days to complete the reverse mortgage process. If you would like to know more about the counseling process or get in touch with a counselor, feel free to contact us.
Learning About Appraisals
Like counseling, appraisals are a necessary part of the reverse mortgage process. The appraisal will determine the value of your home. Because the amount of money you receive from a reverse mortgage is largely dependent on this figure, the appraisal process is worthy of explanation.
Here is a brief description of the appraisal process:
- A licensed FHA appraiser will come to your home and perform an inspection. In the interest of fairness, neither you nor your reverse mortgage lender can choose your appraiser. An independent Appraisal Management Company will select the appraiser.
- After the initial inspection, the appraiser will conduct a comparison between your home and nearby homes in the area. Notable features such as the number of bedrooms, bathrooms, fireplaces, pools, and other fixtures will be taken into account.
- Once both the comparison and initial findings have been considered, the appraiser will issue a final report and evaluation.
Additionally, there are four different results from appraisals that you should be aware of:
- As is – The home is in excellent condition and doesn’t need further repairs, inspections, or alterations. Very minor repairs may be beneficial but are not explicitly necessary.
- Subject to repairs or alterations – The appraiser has noted some repairs or alterations that need to be. If your home is under construction but is at least 90% complete and only has minor work left to do including the installation of appliances, landscaping, and putting in fixtures, you will be issued this type of appraisal.
- Subject to required inspection – Another inspection must be completed before moving on. The appraiser will include a detailed list of items/reasons that require a follow-up inspection.
- Subject to completion per plans and specs – This type of inspection is reserved for homes that are less than 90% complete. In order for a home to be accepted for a reverse mortgage, it must be at least 90% complete.
Why Do Appraisals Expire?
In order to remain accurate, appraisals must be timely. Let’s say that an appraisal was conducted on a home several years ago. By now, that home would have likely risen or decreased in value depending on all sorts of other factors. To help minimize disparities resulting from market fluctuations and similar changes, appraisals must be recent. In certain areas with rapid changes, the FHA reserves the right to shorten the 120-day duration of validity. However, if there is a valid cause or if the market allows for it, the lender may allow an extension for up to 30 days. Alternatively, if the lender submits certain paperwork and receives FHA approval, the extension can last for up to 240 days.
Already Have an Appraisal?
Under certain conditions, you may be able to make use of an existing appraisal. As long as the previous appraisal occurred less than 120 days from the closing date, it should be fine. Just remember that appraisals for reverse mortgages are valid for about four months. However, you must make sure that it isn’t any old appraisal; in fact, the appraisal you receive must be an FHA reverse mortgage appraisal in order to qualify. If you aren’t sure whether your existing appraisal is valid, feel free to contact your lender and ask.