Question:

What do typical reverse mortgage closing costs include and are they different from typical mortgage closing costs?

Answer:

To a large extent, the typical reverse mortgage closing costs coincide with costs for obtaining a regular first mortgage or when refinancing. The origination fee, fee for property appraisal and some upfront insurance payment are indispensable as part of the closing costs.

The FHA Home Equity Conversion Mortgage or HECM accounts for around 90 percent of reverse mortgages and the origination fee for Home Keeper borrowers cannot exceed 2% of the home value. The HECM also charges initially 2% of the home value, or the maximum loan amount, whichever is less, for a MIP – mortgage insurance premium, and then a 0.5% annually on an ongoing basis. This is to protect the client that in case the loan provider goes out of business, the borrower will still have access to loan funds.

Before the reverse mortgage is processed, the property will have to be appraised, which means that a professional appraiser has to be hired to determine the market value of your house. The cost of appraisal should be up to $400. In case repair work is required, the appraiser will have to come for a follow-up appraisal – this will cost less than the first visit. The cost of repairs may be included into the reverse mortgage.

Apart from those, there are a variety of other loan incurred closing fees such as credit report, settlement fee, title insurance, document processing fee, etc. The good news is that it is usually possible to roll into the reverse mortgage loan most of the above-mentioned fees if you are low on cash.

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