Homeowners that are considering a Reverse Mortgage as part of their retirement strategy frequently inquire about reverse mortgage appraisal requirements and process . For any home loan you do, the home (and land) are the collateral used to extend you a loan and you’re typically advanced a large sum of money. Hence, the reverse mortgage home appraisal plays an extremely large role in this loan’s lending process. At the same time, money management is important for seniors, so you don’t want to throw your money away if there are appraisal related issues that could stop you in your tracks.
Knowing what to expect in advance can be extremely helpful. The reverse mortgage is an FHA / HUD insured home loan. Therefore, the appraiser will be looking for certain key items around the home to ensure the home meets FHA standards. Guess what, if your home does not meet FHA requirements on the first visit, the appraiser may need to make a second visit to your home. Naturally, the appraiser will charge YOU for the second visit. Due to this, it’s a good idea to do what you can to hopefully avoid a second visit from the appraiser. That second visit can cost anywhere from $180 – $250 on top of the initial cost of the appraisal.
Part 1 – Reverse Mortgage Appraisal Process Basics
First off, sometimes people think that they can just go out and get an appraisal. However, it doesn’t quite work like that with a reverse mortgage. The appraisal needs to be done by an FHA approved appraiser. They have to have the proper credentials. Not every appraiser can do an FHA appraisal.
Secondly, certain steps have to happen before you can order an appraisal for a reverse mortgage. The reverse mortgage appraisal process mandates that an applicant get reverse mortgage counseling before an appraisal is ordered. When you send back a completed and signed reverse mortgage application and singed counseling certificate, then your lender can order the appraisal. However, in some states there is a waiting period that must be fulfilled before an appraisal can be ordered. For example, in California the lender must wait at least 7 days from the date of your counseling to order your appraisal.
Lastly, you as a borrower and your loan officer are not supposed to have direct contact with the appraiser except for scheduling the appointment and the visit to your home. Due to this, a lender has to order an appraisal with a neutral third party called an appraisal management company. It’s basically just a middle man between you and the appraiser and your lender and the appraiser. The intent is to try and minimize the loan officer or borrower’s influence on the value. They want the appraisal to be based on fact……………..not the value you NEED to make the loan work.
Part 2 – Reverse Mortgage Appraisal Requirements
When the appraiser visits your home, he or she will be looking around to see if your home meets certain basic FHA requirements. There are some FHA requirements that must be met BEFORE
your loan can fund. There are some that can be met after your loan funds. Below is a list of items that come up frequently and their respective requirements.
Three Somewhat Major Reverse Mortgage Appraisal Requirements:
- Roof – How old is your roof? Does it leak? Are there any stains on the ceilings from a leaky roof (past of present)? If the appraiser comments about a possible leaky roof, you’ll need a roof certification. If this can be avoided, it’ll save you about $300 – $500 for the cost of that roof certification. So, if it leaked in the past, but you still have that ceiling stain, just paint the ceiling in that room to possibly avoid the roof cert. Basically, if there is evidence of a leaky roof, you’ll need a roof certification. Items pertaining to a roof normally need to be addressed before funding.
- Is there a swimming pool in your back yard? Prior to funding, the pool must be filled with water. Additionally, the pool water must appear to be normal (i.e., should not be green as if riddled with algae, etc.).
- Do you have a functional heating system? If not, this needs to be put into place before funding.
Seven Minor Reverse Mortgage Appraisal Requirements:
- Before funding, there should not be any exposed wiring.
- There cannot be any rooms without flooring or sinks, tubs, and commodes that are not installed, etc.. Basically, you can’t be in the middle of any incomplete home renovations.
- Do you have safety bars on the windows? If so, does it have a safety release? If not, this will need to be fixed prior to funding.
- If you are in an earthquake prone zone like CA or OR, does your water heater have 2 seismic earthquake straps? You’ll need this prior to funding.
- Does your home have functional smoke detectors?
- Are there functional Carbon Monoxide detectors in your house?
- Any stair cases with more than 3 steps must have a handrail. If there is an exterior deck, it most have a handrail if it’s more than 18 inches off the ground.
These first 10 items are things that typically come up with a reverse mortgage appraisal. The list is not all inclusive. Again, these normally need to be addressed before the loan can fund. Your loan officer should be talking about these items with you. He or she should also strategize with you to hopefully avoid the need to have a second visit from the appraiser.
Reverse Mortgage Home Appraisal Requirements That Can Generally Be Handled Post Closing
- Is there any chipped or peeling paint on the interior or exterior of your home?
- Do you have any untreated, exposed wood?
Hopefully this article helps you gain some understanding of the reverse mortgage appraisal process and reverse mortgage appraisal requirements. The goal is to ensure your loan processing moves as quickly as possible. Also, hopefully this insight can help you avoid wasting money to have the appraiser visit your home more than once.
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Disclaimer: Reverse Mortgage Loan Advisors Is not a lender, bank, or mortgage broker, nor is it affiliated with HUD or FHA. Reverse Mortgage Loan Advisors is simply a website designed to offer information about the FHA insured reverse mortgage program. However, the owner of the site is licensed as a reverse mortgage specialist in several states. Anyone that inquires and requests more information may be contacted by the owner of this site. If the owner of this site is not licensed to conduct business in the state you reside, one of our affiliates will contact you instead.