documentpile In this and following posts we review the 4 reverse mortgage documents you need to examine closely as you research, select, and finally apply for your loan. This is only an overview and is not intended to be an exhaustive explanation of every line in every document.

Consider these as your pre-application documents. You should have received these documents from your loan officer prior to making your decision. They include (1.) the Reverse Mortgage Loan Comparison sheet, (2.) the Good Faith Estimate, (3.) The Amortization Schedule and, (4.) the Total Annual Loan Cost (TALC) calculation.  With these documents in hand you should be able to make an independent, informed decision.  You should also be able to accurately compare offers from a number of lenders if you have done your research properly.  If you do not fully understand the information contained in these documents, you need to find a reverse mortgage specialist willing to meet face-to-face in your home with you, your family and your financial advisor to explain every detail.

Reverse Mortgage Loan Comparison

We begin at the beginning; researching and accumulating information specific to your situation.  The single most important document to request from your loan officer is the Reverse Mortgage Loan Comparison sheet. To get an accurate estimate (at this point, it is only an estimate, not a guarantee) of how much you might qualify for, the loan officer will need to ask some questions about you and anyone else on the title to the property.  Then the data is loaded into a special calculator and the document is produced. Note that this information is much more detailed and accurate than online calculators designed to identify you as a reverse mortgage prospect.  If the information here has not been supplied by you, it is probably inaccurate.  Print out the sample Reverse Mortgage Loan Comparison and follow along as we go over some of the important items on this summary document. This document has almost everything you need to help you to make an informed decision.

Different lenders might have slightly different forms but the Reverse Mortgage Loan Comparison summary sheet should be arranged in 4 distinct columns. The extreme left column identifies each of the categories such as initial interest rate index, total principal limit, liens and disbursements, etc. found in each of at least 3 different specific HECM loans programs; the remaining columns.  (If you have been given a loan comparison sheet that only shows 1 or 2 options, find another loan officer.

The upper left corner shows borrower names (be certain all owners are listed), the principal residence property address and borrower ages (FHA rounds up to the nearest birthday within 6 months).  The youngest borrower is listed first and an assumed property value is indicated.  Note that this should not be the property assessed (tax) value.  It should be an informed, educated guess based upon recent sales of like homes in your neighborhood. Since this value is a critical factor in determining how much you qualify for, consult with your loan officer who should have the experience to help you to arrive at a reasonable estimate.  A seasoned reverse mortgage specialist will advise caution.  Better to be conservative here to avoid disappointment if the FHA appraisal comes in significantly lower.

If you later decide to work with more than one loan officer, be certain to use the same details, same numbers so you compare apple to apples.  Specifically note the date at the bottom left corner of the document.  Interest rates change every week (another critical factor in your calculation) so if you fail to make the comparisons from lender to lender in the same week – your comparison is probably flawed. You will be comparing apples to oranges.

(More – next post)

Author – Robert H. Irving, CSA®
Senior Reverse Mortgage Consultant

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