Getting a reverse mortgage is a big decision, and part of the process involves deciding whether to work with a mortgage broker or lender.

Both entities can offer a reverse mortgage loan, and both are governed by the same sets of guidelines under the Federal Housing Administration’s Home Equity Conversion Mortgage HECM program.

If you’re getting a reverse mortgage through the HECM program, you’ll be safeguarded by the consumer protections it provides, whether you’re working with a broker or a direct lender.

Reverse Mortgage Lenders

The biggest difference between brokers and lenders has to do with the “back end” of the loan process: funding.

Lenders can close loans in their own name through a line of credit or other available funding sources. Since lenders are using their own funds, they have more control over the underwriting process.

This can help you close on a reverse mortgage quickly and with the confidence that you’re not relying on a third party for funding.

Another difference may be the types of products that lenders and brokers are able to offer. Banks will generally offer a few specific products with set guidelines as to who qualifies and what types of properties they will consider for a reverse mortgage.

Reverse Mortgage Brokers

Brokers can be thought of as independent contractors. Unlike lenders, they do not use their own money to fund your reverse mortgage. Instead they work with wholesale lenders.

Brokers work with these wholesale lenders to offer consumers access to mortgage products and as a result, often have access to more products than traditional lenders.

For example, a bank might decide it will only originate reverse mortgages for single family homes.

Brokers, however, could work with many wholesale lenders and can often work with borrowers who own a manufactured home, or do other “non-standard” transactions, such as reverse mortgages for condominiums.

This flexibility is a great benefit and is one of the many reasons people choose to work with brokers.

Additionally, because they have access to so many wholesale lenders and sources of funding, they can offer competitive rates and terms to consumers that banks might not be able to match.

Which is the Right Choice?

While brokers may be more flexible in the types of loans they can originate, direct lenders may offer more stability in the likelihood that you will be approved for a reverse mortgage and close on time (since they have more control over the process).

Lenders will typically have staff in the same building and, if necessary, can move things through the loan process quickly. Brokers can still meet your needs but will always be at the mercy of a wholesale lender since they do not have the funds to originate your reverse mortgage.

The bottom line is, reverse mortgage lenders and brokers might have slightly different roles, but they’re both regulated by the FHA, and it’s safe to do business with either party.

Research References:

• Top 5 Lender Reviews: https://reversemortgagereviews.org/
• Four risk factors to know when retirement planning: https://baltimorepostexaminer.com/four-risk-factors-know-retirement-planning/2015/10/18
• The economist reports: https://homebusinessmag.com/businesses/real-estate/the-economist-reports-residential-property-prices-keep-rising/

Have you considered getting a reverse mortgage?

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