The quick answer is “no,” it’s a completely different type of mortgage than the traditional one that almost everyone is familiar with if they’ve ever bought a home or done a refinance.

They are not underwritten using “debt-to-income” ratios, FICO scores, or “loan-to-value” calculations, but instead use the net cash flow of potential borrowers after all housing expenses have been deducted along with any debt credit card, installment loans and utilities. .

Included in this overview is a 24-month history of property taxes, homeowner’s insurance, and any HOA fees to verify they were paid on time.

A credit report is run to determine if there have been any late payments on credit cards or installment loans during the last 24 months.

If there have been any late payments during that time period, the Lender will request a letter of explanation and may require that some of the reverse loan funds be set aside in an escrow account to pay for ongoing housing expenses.

I am often asked how long a loan will take to complete and that depends on the borrower’s cooperation when asked to provide all the documents needed at the time of application.

And due to the fact that more paperwork is required from the borrower, it usually takes around 45 days to complete the loan and have the borrower sign the loan documents.

What should a person look for in a reverse loan?

They cannot be compared to traditional financing because they are very different and the loan amount is calculated based on the age of the youngest borrower and also depends on whether there is an existing mortgage to pay and the value of the property.

• There are no “Points”, but sometimes there is an origination fee that is determined by the amount of the loan and the interest rate.

• No lender “junk” fees can be charged and no matter who the company is offering the FHA HECM program, they all have the exact same interest rates and fees.

• All rates are regulated by the federal government.

• This is a mortgage offered by the FHA and is insured by the federal government.

The choice of company to represent you comes down to whether they will meet with you in person at your home or expect you to fill out a loan application and submit all your paperwork without helping you through what can be a confusing experience.

Ultimately, a reverse loan is still a mortgage and is recorded against the property in question as a lien, but there are no mortgage payments and the comparison to traditional financing ends there.