Settlement costs

There are so many different charges involved in reverse mortgages, it is important to know what to expect at the settlement. Your lender is required to give you a Good Faith Estimate (GFE) of your settlement costs within three business days of your loan application. Once you get it, review the charges below to avoid any surprises when you sit down to close on your loan.

There are three basic categories of settlement costs:

• Fees to get a mortgage. This includes lender fees and points, as well as a host of other charges involved in obtaining and processing your loan. Points are an upfront charge expressed as a percent of the loan amount (e.g., 1 point is 1 percent of the loan) to increase the lender's effective yield on a loan. The maximam fee a lender can charge fo a reverse mortgage is 2% or $2,500 which ever is more. for the first $200,000 and 1% of the remaining value with a $6,000 cap on their total origination fee.  ($417,000 is the new National FHA limit)

Specific lender fees can include:

• Loan Origination Fee. This is a charge for your lender's work in evaluating and preparing your mortgage loan.
• Application Fee – This charge covers the initial costs of processing your loan application and obtaining your credit report.
• Appraisal Fee – Your lender will need an opinion from an independent appraiser of the market value of home you wish to get a Reverse Mortgage on.  It must be your primary residance. 
• Survey – This fee goes to a surveying firm who will verify that your lot has not been encroached upon by any structures since the last survey conducted on the property and to ensure that the home and other structures and legally where the seller says they are.
• Mortgage Insurance – A lender will require MIP or Mortgage Insurance Priemum on any HECM, reverse mortgagae as this is a HUD requirement.  Premiums are usually paid from the borrow ers equity in a lump sum at closing.
• Homeowner's Insurance – Insurance that protects property against loss caused by fire, some natural causes, vandalism, etc., depending on the terms of the policy. Also includes coverage such as personal liability and theft away from home. Your lender will expect you to have a policy in effect by closing.
• Title Insurance Fees to establish  ownership of the property. Your lending institution is not likely to give you a loan on a house unless you can prove that you own the property. This is where title search and title insurance fees come into play. A title agent will verify that you are, indeed, the owner of the property and issue a title insurance policy to guard the lender against any errors that could have occurred in the searching process. The cost of the policy is usually based on the loan amount. There may also be attorney, escrow, courier fees and other charges involved in the settlement process.
•   Fees to state and local governments. These fees include transfer, recordation and property taxes collected by local and state governments. Your taxes based on the assessed value of the home, which you pay for community services such as schools, public works, and other costs of local government. Taxes can are not tipically paid by the reverse mortgage, as you will not be making mortgage payments at all.  You are responsible for making the payment for your taxes and insurance.