HECM Counseling: The First Step to a Successful Reverse Mortgage
The decision to make a Home Equity Conversion Mortgage (HECM) part of your retirement plan should not be taken lightly. It starts with determining whether it makes sense for your situation, and also includes sorting through choices such as lump sum or installment payments, and considering a traditional reverse mortgage versus a HECM for Purchase program.
Fortunately, the seriousness of the process is evident in one of the very first steps that all reverse mortgage borrowers are required to take. Regardless of the lender you work with, a session with a HUD Certified Housing Counselor is required before completing a HECM application. In addition, the lender may not steer you toward using any particular counselor.
What to Expect
The role of the housing counselor is to help explain the details of a reverse mortgage and provide you with the information necessary to decide if moving forward is right for you. In most states, HECM counseling is available by phone or in-person; however, a face-to-face meeting is recommended by the U.S. Department of Housing and Urban Development. Depending on the agency providing the counseling, there may be a fee charged.
Shortly after scheduling your session, you should receive a packet of information to review in advance. During your counseling, you will discuss your financial situation and your interest in a reverse mortgage. The counselor is not allowed to direct you toward a specific product or lender. Instead, they will clearly explain the options available to you, and their impacts, including HECM alternatives that may be suitable for your needs.
Preparation is Key
While the counseling process relies on established protocols to ensure a successful session, preparation is still important. Make sure to provide any requested information as accurately as possible. Also, be sure to review the preliminary information thoroughly so that your time is spent evaluating the options most relevant to you.
After the session, make sure you understand how your current equity and your age will influence your borrowing power, and your tax, insurance, and maintenance responsibilities, as well as your plans for the eventual repayment of the loan. And remember each individual signing as a borrower will need to have completed a counseling session before proceeding.
Following your HECM counseling, you will receive a certificate of completion allowing you to begin the next steps if you decide that a reverse mortgage is right for you. Visit OpenMortgage.com for more information or call today to speak with an origination specialist and receive a list of HUD Certified Housing Counselors.
Things to know about Reverse Mortgages:
- At the conclusion of a reverse mortgage, the borrower must repay the loan and may have to sell the home or repay the loan from other proceeds
- Charges will be assessed with the loan, including an origination fee, closing costs, mortgage insurance premiums and servicing fees
- The loan balance grows over time and interest is charged on the outstanding balance
- The borrower remains responsible for property taxes, hazard insurance, and home maintenance, and failure to pay these amounts may result in the loss of the home
- Interest on a reverse mortgage is not tax-deductible until the borrower makes partial or full re-payment