Two costs are paid out of pocket, the counseling and appraisal. The three largest costs are financed from the loan and those are the FHA mortgage insurance, title insurance and origination fee.

FHA mortgage insurance

FHA mortgage insurance guarantees

• The homeowner cannot “outlive” the reverse mortgage
• The homeowner and heirs will not be liable if the balance of the loan exceeds the value of the home
• The FHA will take over the loan if the lender becomes financially troubled

Title fees

Title ensures that the homeowner’s legal ownership of the property. Other title fees are

• Title insurance
• Title settlement
• Title search/exam
• Recording
• Delivery
• Payoff
• Notary
• Documentation preparation

Origination fee

The origination fee is what the lender makes on the reverse mortgage and the FHA determines what that is using the following factors

• 2% of the first $200K of the property and 1% of the second 1% of the second $200K property value
• A floor of $2,500
• An absolute maximum of $6K

Appraisal

Because a reverse mortgage appraisal must be done by an FHA approved appraiser and follow the specific guidelines, this appraisal can cost anywhere between $475 to $550.

Other closing costs

• Wire fee
• Counseling
• Credit report
• Flood certificate