The 411 on Applying for an HECM Loan
Part III: You're 62, and have substantial equity in your home to tap into, but may be wondering where to go from here? Once you've satisfied the eligibility requirements for an HECM, and found a lender that will help set your financial goals into action, it's time to apply for your loan. We've learned how a Home Equity Conversion Mortgage can benefit home owners by eliminating their mortgage payment, offers a variety of disbursement options, and frees up funds for a vacation, savings, etc. Planning ahead, and mapping your financial forecast is step one in the loan process.
In the last two segments of this HECM series, we covered the basics, and many of the nuances associated with this type of loan. An education in HECM is first, and foremost, and hopefully this series as well as advice from your lender will help you make a more informed decision.
To submit your application, you will be required to complete a counseling session by a HUD approved counselor and these certificates cost from $125 to $200. They will sit down with you either face to face or telephone to discuss the legalities, and obligations of an HECM, evaluating your unique situation to ensure this type of loan is the right option for you. The more questions the better, so ask away! To find a HUD counselor in your area visit http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hecm/hecmlist
After you've completed your application, and you receive an estimated loan cost, it's appraisal time to find out how much equity you have to work with, and ultimately determine the amount of your loan. The appraiser must be FHA approved, and they will evaluate for any major defects, to ensure your home is structurally sound. Serious issues such as a roof leak will need to be addressed before moving forward.
You'll be required to carry three forms of insurance. A home hazard policy which you should already have as home owner, federally mandated government insurance that ensures that what must be repaid won't exceed your home's value, and title insurance, one that is required to protect the lender, with the option of title insurance to protect you as the borrower.
Once you've decided how you'll receive your loan proceeds, and you've signed the closing documents, you'll have three days to back out should you choose to cancel the mortgage.
An HECM can be a wonderful way to take advantage of your home's value, and enjoy your hard earned retirement with money in the bank. Talk to a lender today, to find out if an HECM is right for you, and get your financial game plan rolling.