Understanding the Reverse Mortgage Closing Process Timeline

A reverse mortgage closing process can take anywhere from 60 to 90 days, but the actual timeline may vary depending on individual circumstances.

The process typically begins with the lender sending a loan estimate to the borrower within 3 business days of receiving the loan application.

The borrower then reviews and signs the loan estimate, which outlines the terms of the loan, including the amount borrowed, interest rate, and fees.

The lender will also conduct an appraisal of the property to determine its value.

The appraisal can take anywhere from 10 to 30 days, depending on the lender's workload and the complexity of the appraisal.

Once the appraisal is complete, the lender will send the borrower a loan commitment letter outlining the final terms of the loan.

The borrower then has 3 business days to review and sign the loan commitment letter.

After the loan commitment letter is signed, the lender will schedule a closing meeting with the borrower and other necessary parties.

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The closing meeting typically takes place at the borrower's home or at the lender's office.

The borrower will sign the final loan documents, including the promissory note and the mortgage, during the closing meeting.

The borrower will also receive a copy of the closing disclosure, which outlines the final terms of the loan and the amount borrowed.

The entire process, from loan application to closing, can take anywhere from 60 to 90 days.

For more insights, see: How Long Will It Take?

The pre-closing steps for a reverse mortgage can be a bit of a waiting game. Your file will be turned over to an underwriter to review your mortgage application after the lender receives the preliminary reports and inspections report.

The underwriter will verify that you've met all reverse mortgage requirements, which may take some time. They'll also conduct a title search and purchase title insurance to ensure everything is in order.

You may need to work with the lender to sort out any pending issues, such as unpaid liens or trusts. This is a normal part of the underwriting process, and it's not uncommon for these issues to arise.

Broaden your view: How Long It Will Take?

The underwriting process is a crucial step in getting your mortgage application approved. It's done manually, which means a human underwriter will review your file.

The underwriter's job is to verify that you've met all the reverse mortgage requirements. This includes checking for unpaid liens or trusts.

If you have any pending issues, you'll work with the lender to sort them out. This might take some extra time, but it's essential to get everything in order.

A disposition on your loan will be issued after the underwriter's review. This will let you know whether your application was approved, approved with a condition, or denied for a specific reason.

If your application is approved with a condition, you'll need to provide additional information before getting the final approval.

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HUD-mandated counseling is a crucial step in the reverse mortgage process, and every borrower must take this step before moving forward with their loan application.

This counseling requirement can sometimes lead to a surge in demand for appointments, as seen after HUD's program changes in September 2017. In some cases, securing appointments can be challenging.

Borrowers in certain states, like California, may face additional hurdles, including mandatory waiting periods after counseling before loan application submission. This is due to state regulations, such as California's 7-day cooling-off period.

Even a quick 2-day appointment scheduling can result in a significant waiting period before the loan process can officially commence. In California, this can translate to a 9-day delay within a typical 30-day process timeline.

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A reverse mortgage can close in as little as 30 days, but it's essential to have realistic expectations.

This ideal scenario includes the borrower completing their mandatory counseling, promptly returning the signed application, and experiencing no delays from service providers. However, predicting which loans will enjoy this smooth and swift process is challenging.

A more pragmatic approach involves setting realistic expectations, with a 45-day process allowing for some cushion for unexpected delays related to title issues, appraisals, or other unforeseen circumstances.

Once the loan application has been approved, a closing (signing) of the reverse mortgage is scheduled with a title agent or attorney. The lender should confirm the payment plan the borrower wishes to receive.

Closing documents and final figures are prepared. Closing costs are normally financed as part of the loan, but the homeowner is allowed to pay any costs in lieu of financing, if they so choose.

A reverse mortgage must be the only lien on a property. This means you must pay off any existing mortgage(s) or other obligations for which a lien has been placed on the property.

You can use your reverse mortgage proceeds to pay off the mortgage or other obligations. If existing liens are identified, the payoffs are updated accordingly.

Your closing agent will pay off all existing liens, verify taxes are paid, and make sure that you have a current homeowner’s insurance policy.

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The loan process for a reverse mortgage can be complex, but understanding the basics can help you navigate the journey. The funding process typically begins after the borrower signs the closing documents.

There's a three-day rescission period during which the borrower can cancel with no penalty, starting from the fourth day after signing.

The HECM loan process is a bit more complex than other loan options. It involves a reverse mortgage, which allows homeowners to borrow money using the equity in their home.

To be eligible, borrowers must be at least 62 years old and own their home outright or have a low balance on their mortgage.

The loan amount is determined by the home's value, the borrower's age, and current interest rates.

Borrowers can choose to receive their loan proceeds in a lump sum, monthly payments, or a line of credit.

The loan does not require monthly mortgage payments, but interest and fees will accrue over time.

The loan becomes due when the borrower passes away, sells the home, or moves out.

The borrower or their heirs will be responsible for paying off the loan balance, which may be more than the home's value.

For more insights, see: What Percentage of Home Value for Reverse Mortgage

The funding process can be a complex and time-consuming part of the loan process. Once the borrower has signed the closing documents, there will be a three day rescission period during which the borrower has the ability to cancel with no penalty.

Funding typically occurs on the fourth day after closing documents are signed, when the loan is recorded with the county and funds are released to the borrower.

Most loan applications experience delays due to issues such as POA, Conservatorships, Trusts, non-borrowing and non-occupying individuals on the title, private liens, and property issues like reverse mortgages on condos, manufactured homes, and rural properties.

A good loan originator will take the time to address these problems and educate the borrowers, making the process easier to facilitate.