Closing cost for any reverse mortgage varies- that is the popular answer. Yes, closing costs for reverse mortgage loans vary by lenders and the programs they offer. As far as I know, there are no reverse mortgage loans available that did not have costs associated with them.
Like any other real estate loan, a reverse mortgage loan is generally a prolonged and anxiety-ridden exercise that involves many steps and procedural formalities.
Prior to that closing day arrives, a long list of things has to transpire. Along the journey of getting a reverse mortgage- i.e. from required counseling to closing of the escrow, your lender and other third party vendors will have performed several services for the completion of your loan process. Closing costs are mainely fees and expenses that are incurred by these professionals that will charge you for the services they performed for you.
In addition to these above costs, there are additional items that you will come across. You can see the detailed items of closing costs in the Loan Estimate document the lender will provide you right after you applied for the reverse mortgage. So every loan process has related costs which the reverse mortgage borrower is obligated to pay for them.
Those who own a house or have a mortgage loan, at least have heard about closing costs. Obtaining a reverse mortgage on your home is not free. Once you submit your application, you will be provided with a loan estimate document in which all the elements related to your loan are shown. Before you finalize the settlement and get the proceeds of the loan, you will sit down with a reverse mortgage loan signing notary or agent in order to sign all the necessary documents and paperwork. During that time, you will be able to see the final numbers of your closing cost which you should compare with numbers that were given to you in the loan estimate document.
Along the journey of getting a reverse mortgage- that is from required counseling to closing of the escrow, your lender and other third party vendors will have performed several services for the completion of your loan process. As you can now imagine, closing costs are fees and expenses that are incurred by these professionals that will charge you for the services they performed for you. Not to mention, every loan process has related costs which the reverse mortgage borrower is obligated to pay for them.
Each lender has their own rates that they will charge you. Because of this, all the experts recommend that you shop around and compare both the rates and total cost for the whole loan that the lenders are offering . The three types of important costs that you come across at the beginning of the loan process are: Origination Fee, Counseling Fee and Appraisal Fee. In addition to these, a typical reverse mortgage loan fees that I have come across in my loan signing assignments are fees for: Document preparation, Flood Certification, Mortgage Insurance Premium, Credit Report, Title Insurance, Notary Signing service, Recording, State Tax and shipping Charges.
All costs are not to be paid out of your pocket. The only expense items that you will have to pay up front would be Counseling fee and Appraisal charge. In most situations most of these fees and costs are financed and rolled into your loan principal so it becomes part of your loan amount.
Closing costs in each State and with each lender will not be the same. As I mentioned earlier, it is to the borrower’s advantage that you compare different fee schedules; get more than two quotes from each lender and then compare them before selecting the right lender or program for you.
On a federally insured reverse mortgage program by The Federal Housing Administration (FHA) and Home Equity Conversion Mortgage (HECM) program, there is a requirement to 2% as mortgage insurance that you pay out of your pocket.
Please be advised to find a recognized reverse mortgage lender company. Conduct a search of them in the Better Business Bureau. before applying for a loan.
