A reverse mortgage can be a great tool for those over the age of 62 who have significant equity in their homes and need access to cash. However, the federal government passed changes in recent years that make it more difficult for some people to qualify for a reverse mortgage. Here’s a look at some of the most important changes:
Financial Assessment
Under the new rules, anyone applying for a reverse mortgage will be required to undergo a financial assessment. It’s not as easy as showing equity capacity in your home any longer; now, your credit score, cash flow and financial records will be used as part of your application, too.
Longer Application Timeline
Since banks will be looking at more financial information than they did previously, it could take longer to hear whether your application has been approved or not. In the past, reverse mortgage applicants typically heard an answer in four weeks or less. Now, it takes more in the ballpark of six weeks to learn whether you’ve been approved.
Better Deals
While these new rules make it a bit trickier to get a reverse mortgage, there’s a positive for consumers, too. Since it is now safer for banks and mortgage lenders to offer these mortgages, there is less risk for lenders. This means more companies will likely get into the game. Competition breeds lower costs for reverse mortgage applicants, so you can expect to find better loan deals with the passage of more strict application guidelines.
A reverse mortgage isn’t for everyone. Even if taking this step makes sense for your finances – and you can qualify – these loans can be complicated and expensive. However, if you think a reverse mortgage may be right for you, it’s important to educate yourself about the process and about the pros and cons of this tool. With the passage of new regulations making it more difficult to qualify for a reverse mortgage, it’s important to understand the changes discussed above, as well.