Question:

How to choose a lender for FHA home equity conversion mortgage (HECM)?

Answer:

The FHA home equity conversion mortgage (HECM) is the most popular reverse mortgage plan in the US. When choosing a lender for the FHA insured home equity conversion mortgage (HECM), it is advisable that you compare closing costs, rates and the lender's commitment. HECM interest rates did not vary from lender to lender for a long time but ever since the LIBOR-based HECMs were introduced, many different HECM programs with differing margins and different payment plans have sprung.

In general, a private lender will offer FHA home equity conversion mortgage (HECM) along with their proprietary reverse mortgage program. Since HECM programs can vary with lender, you will need professional assistance to decide what type of reverse mortgage will suit best your needs.

Before you sign a HECM, you will have to undergo the additional HUD required reverse mortgage counseling. You have to ask about fixed rate and adjustable rate HECMs and compare HECM benefits to proprietary reverse mortgage plans. You have to compare rate, mortgage insurance, credit line growth, loan principal amount, etc. Currently, there are highly complex reverse mortgage programs developed, and one cannot easily tell which program will benefit you better for the moment or in the long run without a deep preliminary analysis. The FHA home equity conversion mortgage (HECM) program requires face-to-face counseling in many states anyways, so just have your questions ready for the HECM counselor.

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