The Closing Fees in a Reverse Mortgage
Reverse mortgages can benefit many senior citizens who want to remain in their homes until they pass away, but the fees can be problematic. The loans can provide those persons with the security and the monthly income that they need. However, the closing costs of such loans can be tough to overcome. The following are four closing costs that a debtor has to manage when applying for a reverse mortgage:
The IMIP Fee
The term IMIP is short for the FHA’s initial mortgage insurance premium. Loan applicants must pay an initial fee for the mortgage insurance. They must pay the fee when they are first closing the agreement and once per year thereafter. The initial MIP is equal to .50 to 2.5 percent of the The annual MIP is 1.25 percent, depending on the amount of money that the debtor wishes to borrow during the first year. Those who take less than 60 percent of the available funds will only have to pay an IMIP fee of .50 percent.
The Counseling Fee
A reverse mortgage applicant may have to pay a counseling fee. All applicants in the United States and a few other countries must go through a counseling course before they obtain reverse mortgages. The counseling courses help the borrowers to understand all the specifics of the agreement, and it helps them understand whether a reverse mortgage is their best recourse. The applicant must select a counseling course that the Housing and Urban Development organization approves. The average fee is a little over $100 for counselors who do charge. Consumers may be able to find someone who does not charge, however.
The Organization Fee
The origination fee or organization fee is a fee that the borrower pays to the organization that arranges the reverse mortgage. The price for this fee varies between lenders, and it depends on the amount of time and work that the processors and arrangers put into it. Some lenders do not charge the fee at all, and other lenders charge thousands of dollars.
The Third Party Fee
The third party fee is a fee that goes to all third-party companies that play a part in the lending process. Examples of third-party companies that the fee covers are title companies, home appraisers and government agencies. Other third-party fees that may be involved are escrow fees and fees to obtain a credit report. The third-party fees can get quite expensive for this process.
How to Overcome the Closing Fees
A consumer can overcome the closing fees in a reverse mortgage by researching the process and the company that is involved with the process. While many people have successful, happy experiences with their reverse mortgages, others have been victimized by scams. Interested persons should be sure to find a reliable counselor and deal with organizations that the counselor approves. Reverse mortgages have benefits and disadvantages to them. The best way to maximize the advantages is to work with a company that charges the least amount of fees and choose the reverse mortgage type that best fits the consumer’s situation. The Home Equity Conversion Mortgage is the most flexible type available as it allows the borrower to receive loan proceeds using a number of payout options.