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Reverse Mortgage Appraisal Frequently Asked Questions

HECM for purchase

An appraisal on your property to secure a reverse mortgage can be confusing. There is a lot of jargon that isn’t explained and specific requirements that must be done from the appraiser. Our company, Shop Reverse Mortgage, understands this and seeks to make the appraisal process easy and painless for our customers.

Skyler Smith - UnsplashTo take a step back, a reverse mortgage is a retirement tool for seniors over the age of 62. This financial product is useful for seniors because often times seniors will find themselves to be cash poor but house rich. This is because over the course of their traditional mortgage, the person or couple have built up significant equity in their home over the course of multiple years, usually between 15 to 30.

Having built significant equity in their home offers an opportunity to receive a cash infusion. These funds can be applied for however the person or couple sees fit; often time it is used to purchase medication that their insurance company will not cover or to travel to see both children and grandchildren. Having worked all their life and reached the age of retirement, it isn’t far-fetched for the person or couple to want to enjoy the fruits of their labor. Life over the age of 62 should be easier and a reverse mortgage is an excellent tool to ensure that it is.

Rather than paying money to the lender — such as one must in a traditional mortgage — a reverse mortgage has the lender pay you. This can be in various forms. According to a past article, How to Choose a Reverse Mortgage Lender, the FTC provides several payment options for a HECM:

  • a single disbursement option – this is only available with a fixed rate loan, and typically offers less money than other HECM options
  • a “term” option – fixed monthly cash advances for a specific time
  • a “tenure” option – fixed monthly cash advances for as long as you live in your home.
  • a line of credit – this lets you draw down the loan proceeds at any time, in amounts you choose, until you have used up the line of credit. This option limits the amount of interest imposed on your loan, because you owe interest on the credit that you are using.
  • a combination of monthly payments and a line of credit.

In order to secure these payments, one must go through the appraisal process, which when working with our company, is a walk in the park. To start, according to Investorpedia, an appraisal is the following:

a valuation of property (ie. real estate, a business, an antique) by the estimate of an authorized person. In order to be a valid appraisal, the authorized person will have a designation from a regulatory body governing the jurisdiction the appraiser operates within.

HECM for purchaseThe Federal Housing Administration and the U.S. Department of Housing and Urban Development set the standards for the completion of an appraisal. For instance, for single families, the specific document is the Fannie Mae Form 1004 MC/Freddie Mac Form 71, Market Conditions Addendum to the Appraisal Report. There is also a list of other forms that must be completed for various other properties/assignment types. These range from Single Family, Detached, Attached or Semi-Detached Residential Property to Compliance or Final Inspection for Existing Property — the complete list can be viewed by clicking here.

Requirements that the appraiser must have are the sales contract, surveys, the land lease, and other documents within the loan file. The appraisal will use this information to help determine if the property is eligible. Essentially, they are observing and analyzing the property to ensure it meets the Federal Housing Administration and the U.S. Department of Housing and Urban Development requirements, which includes “legal requirements, land use considerations, Externalities, site conditions, property improvements, hazards, repair requirements, water supply and new construction MPS.”

There is significantly more information the appraiser must compile during their process. It isn’t necessary to know; however the following information is. An appraiser is often from the area and is knowledgeable on the above information and more. Their inspection will be performed at the property. In the past, a person could choose their own appraiser; however, Wall Street and consumer protection reforms prohibit this. The appraisal must also be recent to ensure validity. The process is comprehensive.

Couple seeking a reverse mortgageFor instance, one of our past customers Frank and Lisa McGwire, were seeking a reverse mortgage to have income to pay for medication that wasn’t included on their insurance. To do so, they had an appraisal completed on their home. Before the appraisal arrived, the couple thoroughly cleaned their home — something we recommend for every person before they are having an appraisal preformed. The process took around an hour. Our company was given the results, which we then shared with the couple. The process was simple, and didn’t create much additional stress into their lives.

If you are like Frank and Lisa McGwire and are seeking a cash infusion, call our company today so we can get the ball rolling on the process. Our hours are Monday to Friday, from 9 am to 8 pm EST, and from Saturday to Sunday, from 12 pm to 3 pm EST. To speak with a specialist, please call (888) 547-8308. If you are interested in learning more, our specialist can provide you with a wealth of information. Alternatively, you can access our website where we answer many frequently asked questions and also have a learning center that goes in more detail regarding the most important information related to a reverse mortgage.