Managing finances is hard at every age, but it gets especially tough if you’re retired and learning to abide by a very strict budget. More often than you think, people underestimate the amount of money needed to live comfortably after retirement and find themselves in a bit of a pickle financially. If this is something that you’re struggling with, then you may want to consider applying for a reverse mortgage.
A reverse mortgage is basically a loan against the value of your home that you don’t have to pay back until you die or move out of the house. The loan is paid out in monthly installments and can really help supplement your income if you’re on a fixed budget. Not only that, but the interest on the loan is not tax-deductible like it is with a regular mortgage, so it’s quite beneficial from a financial standpoint.
Applying For a Reverse Mortgage
Step 1 – Submitting the Initial Application
The first step in applying for a reverse mortgage is to submit an initial application. This can be done online, over the phone, or in-person at a lending institution. You’ll need to provide basic personal details and information about your home. Once you’ve submitted the initial application, a loan officer will contact you to discuss your options and answer any questions you may have.
Step 2 – Getting Counseling
After submitting the initial application, the next step is to get counseling from an approved counseling agency. The government requires this particular step to make sure that you understand all of the implications of taking out a reverse mortgage. The counseling session will last about an hour and can be done over the phone or in person.
Step 3 – Appraisal
According to Attorney Tommie Harsley, the next step is to appraise your home. The lender will usually pay for this, but it’s important to make sure that you get a professional appraisal so that you know how much your home is worth. This will determine how much money you can borrow against your home.
To determine the value of your home, an appraiser will come to your residence and look at the condition of your property, its location, and any recent upgrades or additions you may have made. After considering all of these factors, the appraiser will give your home a value.
Step 4 – Underwriting
In the underwriting step of a mortgage application, the lender will evaluate the borrower’s creditworthiness and assess the value of the property under consideration. The lender will also determine whether the borrower has the ability to repay the loan. If the borrower receives approval for a reverse mortgage, they will be required to provide documentation to support their application. This documentation may include tax returns, pay stubs, bank statements, and proof of income. If everything looks good, then you’ll be approved for the loan and can move on to the next step.
Step 5 – Closing
The final step is closing when all the paperwork is signed to finalize the agreement. Once everything is in order, you’ll start receiving your monthly installments and can use the money however you see fit.
Attorney Tommie Harsley believes that if one does their research beforehand, the process of applying for a reverse mortgage should feel relatively straightforward.