Reverse Mortgage Counseling: A Comprehensive Guide

A reverse mortgage can be a complex and confusing topic, but with the right guidance, you can make an informed decision about whether it's right for you.

To qualify for a reverse mortgage, you must be at least 62 years old and own your home outright or have a low balance on your mortgage.

The Federal Housing Administration (FHA) insures reverse mortgages, which can provide peace of mind for homeowners.

The Home Equity Conversion Mortgage (HECM) is the most common type of reverse mortgage, and it allows you to borrow a portion of your home's equity in a lump sum, monthly payments, or a line of credit.

Reverse mortgage counseling is a crucial step in the process of obtaining a reverse mortgage. Counseling is required before you can apply for a reverse mortgage.

Both you and your spouse must complete the counseling if you're married. HUD-approved agencies provide counseling. You can choose your counselor.

You can expect to pay between $125 and $200 for counseling, with the option to pay at closing if you can't pay upfront. Counseling doesn't guarantee loan approval.

You'll receive a certificate upon completion of the counseling. Your counselor will discuss alternatives if a reverse mortgage isn't right for you.

Here are the key facts to remember about reverse mortgage counseling:

The FHA mandates that every reverse mortgage borrower goes through counseling to ensure you understand how reverse mortgages work and how they will affect you, your spouse, and your heirs.

You have the power to choose where you get reverse mortgage counseling, and your lender doesn't get to pick a counselor for you. If you've already spoken to a lender, they may provide a list of HUD-approved counseling agencies, which will include at least five agencies in your state and one within driving distance of your home.

You can also search for HUD-approved agencies in your area using the In-Person HECM Counseling Locator or check out the list of top reverse mortgage counseling agencies, which includes agencies like QuickCert, Hancock Community Development, Inc, and Credit.org.

If you're looking for a specific type of counseling, such as online or phone counseling, you can check with the HUD counseling agencies in your area to see what options are available. Typically, in-person counseling is preferred, but many agencies now offer virtual appointments due to the pandemic.

To get the most out of your reverse mortgage counseling session, you'll want to come prepared. Review the handouts your counselor provides at least a day before the session, which should include a handout called "Preparing For Your Counseling Session" and a printout that explains how to compare loans.

You should also have a copy of the total actual loan cost (TALC) calculation and a loan amortization schedule. Additionally, you'll receive a booklet published by the National Council on Aging (NCOA), "Use Your Home to Stay Home—A Guide for Homeowners Who Need Help Now".

It's a good idea to jot down questions you have about reverse mortgages beforehand. Some examples of questions to consider include: What are the pros and cons specific to my financial situation? How does a reverse mortgage affect my heirs? What are the associated fees and interest rates?

You'll also want to discuss your current income, expenses, and debts with your counselor, so it may be wise to have any bank statements with you to aid in this conversation.

Those with an interest in reverse mortgages need to receive counseling. Typically, independent reverse mortgage counseling is required before closing for the borrower and co-borrower, who will have a vested interest in closing. This ensures they understand the implications of the loan.

Non-Borrowing Owners (NBO) coming off title at closing must also receive counseling. Power of Attorney or Guardian/Conservator must be counseled on behalf of any borrower(s) or vested owner(s) that are legally incompetent.

In some states, like California and Arizona, counseling must be completed before application. In Texas, counseling must be completed at least five days before closing, and the counseling certificate is valid for 180 days.

Here's a list of individuals who require counseling:

Family loans can offer a more flexible alternative to traditional financial arrangements. If not handled properly, they can lead to family conflicts or even legal issues.

It's essential to seek legal advice before entering into any family loan agreement. This ensures that you understand your rights and responsibilities.

A written record of the agreement is also crucial to avoid disputes down the line. This can help prevent misunderstandings and ensure that everyone is on the same page.

Family loans can be a good option for those who want to avoid the costs associated with reverse mortgages. However, it's still important to approach these agreements with caution and seek professional advice.

To be eligible for reverse mortgage counseling, there aren't strict requirements, but you typically must be at least 62 years old and have a low mortgage balance or own your home outright.

Your counselor's job is to ensure you understand the facts, not to approve or deny you for a mortgage. This means your financial situation doesn't matter, and you can still benefit from counseling if you're interested in a reverse mortgage.

To become a HECM counselor, you must meet specific eligibility criteria, which include passing HUD's HECM Counseling Exam and completing a training course related to HECM counseling within the past two years.

Here are the HECM counselor eligibility requirements in detail:

To qualify for a reverse mortgage, you typically must be at least 62 years old.

There aren't strict eligibility requirements for the counseling itself, but you do need to meet the age requirement to proceed with the mortgage process.

Your counselor's job is to ensure you understand the facts, not to approve or deny you for a mortgage, so it doesn't matter what your financial situation looks like.

To get started with counseling, you'll need to share some basic information, including your name, address, and date of birth.

Here are some of the details you'll need to provide during counseling:

To become a HECM counselor, you'll need to meet certain eligibility requirements. You must have passed HUD's HECM Counseling Exam.

First, you'll need to register for HUD's HECM Counseling Exam and pass it successfully. You'll also need to pass the HUD Certification Exam upon publication of the Final Rule.

In addition to passing these exams, you'll need to have completed at least one training course related to HECM counseling within the past two years. This is a requirement that must be met before you can apply to become a HECM counselor.

You'll also need to be employed by a HUD-approved housing counseling agency. This is a crucial step in the process, as it ensures that you have the necessary expertise and experience to provide high-quality HECM counseling.

To check your eligibility, you can review the following criteria:

If you meet these requirements, you'll be eligible to apply for the HECM counselor position.

To get started with the FHA Connection (FHAC), you'll need to establish an FHAC User ID. This is a crucial step for all HECM Roster Counselors.

You can request an FHAC User ID after submitting your Roster application and being accepted by HUD. If you're applying to be both a coordinator and counselor, you must complete the Roster application first and be accepted by HUD.

To apply for a User ID, go to the FHA Connection website at https://entp.hud.gov/clas/. Click on "Registering a New User" in the Getting Started section.

Next, find "FHA HECM Housing Counselors and Counseling Agency Application Coordinators" and click on "FHA HECM Housing Counseling". Fill out the HECM Housing Counselor Registration page.

You'll need to select whether you're registering as a counselor, coordinator and counselor, or only as an agency coordinator. If you're registering as a counselor or coordinator and counselor, click "Are you registering as a member of the FHA HECM Counslor Roster." If you're registering as an agency coordinator, click "Are you registering as an FHA Connection Application Coordinator for the HECM housing counseling agency that employs you?" and enter the HCS ID of that agency.

Click SEND, and remember your password – you'll need it to sign in on the FHA Connection. Your User ID and password will be used to update your roster information, recertify, and enter proof of continuing education.