To know whether a reverse mortgage is right for you or your family, the U.S. Dept. of Housing and Urban Development (HUD) and other agencies have prepared materials for homeowners looking for reverse mortgage counseling.
With all FHA-insured Home Equity Conversion Mortgages (HECM), the homeowner is first required to attend an counseling session with a licensed reverse mortgage counselor. In this session, which can take more than an hour and a half, information and advice is given to the homeowner based on his/her budget and individual reasons for wanting a reverse mortgage. The counselor and homeowner(s) review income, any debts or existing mortgages, monthly expenses including medical, home improvement plans, cash flow, and other relevant factors. This session can be held over the phone or in person.
You can also expect to learn about:
- The FHA and how the HECM program works
- Interest rates and your loan options
- The Total Annual Loan Cost Disclosure you receive from your HECM lender
- How a reverse mortgage (and what type of loan) may fit into your budget
- Closing costs and associated fees, and how they may be financed
For family members acting as power of attorney or legal guardian for the homeowner, the reverse mortgage counselor will require proof of guardianship or power of attorney before arranging the session.
If one spouse is not on title to the property, the spouse must also join the counseling session. This non-borrowing spouse should understand that if the borrowing spouse predeceases or no longer uses the home as their primary residence, the reverse mortgage will become due. In these cases, repayment is typically made through the proceeds of the sale of the property, or through a refinance into a new mortgage.
It is a good idea for the family to sit down together and discuss their wants and needs for a reverse mortgage prior to this session, and for a family member or members to join the counseling session.
After the session, the homeowner will receive the required “Certificate of HECM Counseling”, which verifies that the prospective borrower has met with a licensed counselor.
With this certificate in hand, prospective borrowers are then directed to submit a reverse mortgage application. To find an FHA-approved reverse mortgage counseling agency, visit the HECM National Counseling Network page by U.S. HUD
, or search the database by location here