Unless you are in a 55+ community, the next step of your life as a retired adult may mean dealing with reverse mortgages. That, in turn, requires finding the right lender for your reverse mortgage. Since taking out a reverse mortgage is a big decision, it’s important to find a trustworthy and reliable lender. In any situation, you will want to make sure to get the best loan for your situation, and the best interest rate and fees.
As you begin your search, here are some planning strategies to keep in mind:
1. Start Collecting Names
Before deciding on a reverse mortgage lender, you’ll need to know what companies are in the business of mortgage lending. With the prevalence of technology, you can get quite a bit of information beforehand on what companies are worth calling, and which ones you should probably avoid. Keep in mind that unlike other types of mortgages and loans, you will not necessarily be dealing with big names when looking for a reverse mortgage lender, as many banks have exited the business in the past several years because of the risks involved with issuing these types of loans. If you are not sure where to start your search, the National Reverse Mortgage Lenders Association (NRMLA) Lender Locator is a good tool, as is the US Department of Housing and Urban Development’s Lender List. Most reverse mortgages are insured by the Federal Housing Administration, so this list can tell you what companies are FHA-insured.
2. Narrow the Choices
Now that you’ve compiled a list of potential lenders, you can start asking around to find out about their history and reputation. Perhaps the easiest step in this process is to think about friends, family members, and others you know who have taken out reverse mortgages. Do they recommend using or avoiding their chosen lender? In the event that you can’t get a personal recommendation, another good resource to check a lender’s past is through the Consumer Financial Protection Bureau’s Consumer Complaint database. On the site, you can filter by sub-product (such as reverse mortgage) or the lender’s name. You can then read through the section of consumer narratives to find any consumer complaints and the company’s response, if available. Other good online sources include local Better Business Bureau listings and Consumer Affairs. These entities moderate user reviews, filter out spam reviews, and give companies a chance to respond to complaints. For a fee, you can also get assistance from a fee-based reverse mortgage counselor.
3. Start Making Contacts
Once you have decided on a few loan officers who look promising, you can start asking basic questions. In person, through the phone, or via email, areas to cover in your inquiry include:
• Their experience with reverse mortgages. Ideally, you’ll find someone who has been in the business for several years and has closed dozens or hundreds of loans.
• Their opinion on whether a reverse mortgage is best for you, or if there is a better option. The prospective lender should be able to explain all the options available to you, what a reverse mortgage is, and why it is or is not the best choice for you. Alternatively, he or she can recommend that you consult a financial advisor.
• Drawbacks of taking out a reverse mortgage. Any potential lender should be able to identify potential drawbacks and risks. One who simply neglects these issues should indicate that you are not dealing with a trustworthy individual.
In addition to professional qualifications, you should find a lender who is patient, experienced, friendly, and doesn’t pressure you into getting a loan.
4. Compare and Contrast
After you’ve selected at least three final candidates, it’s time to choose the best one. Look at their interest rates and costs like origination fees, closing costs, and servicing fees. If you are getting an HECM, other fees associated with reverse mortgages should not vary.