Reverse Mortgages for Seniors FHA's Home Equity Conversion Mortgage (HECM)
Looking for housing options for you, an aging parent, relative, or friend? Do some research first to determine what kind of assistance or living arrangement you need – is a reverse mortgage right for you?
Senior homeowners age 62 and older can use FHA-insured reverse mortgages to convert the equity in their homes into monthly streams of income and/or a line of credit to be repaid when they no longer occupy the homes. Homeowners are required to receive consumer education and counseling by an approved HECM counselor so they can be sure this program meets their needs.
HECM housing counselors will discuss program eligibility, financial implications and alternatives to obtaining a HECM plus provisions for the mortgage becoming due and payable. Upon the completion of HECM counseling, you as a homeowner should be able to make an independent, informed decision of whether this product will meet your needs.
Homeowners who meet the eligibility criteria can complete a reverse mortgage application by contacting a FHA-approved lending institution such as a bank, mortgage company, or savings and loan association. We are a FHA-approved lender,
Borrower Requirements:
Mortgage Amount Based On:
Financial Requirements:
- No income or credit qualifications are required of the borrower
- No repayment as long as the property is the primary residence
- Closing costs may be financed in the mortgage
Property Requirements:
- Single family home or 1-4 unit home with one unit occupied by the borrower (which can also be FHA-approved condominiums or manufactured homes and leased land)
- Meet FHA property standards and flood requirements
Common Questions about FHA Reverse Mortgages - (Top)
What is a reverse mortgage? (Top)
A reverse mortgage is a special type of home loan that lets a homeowner converts a portion of the equity in his or her home into cash. The equity built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower no longer uses the home as the principal residence. FHA's reverse mortgage provides these benefits, and it is federally-insured as well.
Can I qualify for an FHA reverse mortgage? (Top)
To be eligible for a FHA reverse mortgage, FHA requires that you (the borrower) be a homeowner, 62 years of age or older; own your home outright, or have a low mortgage balance that can be paid off at the closing with proceeds from the reverse loan; and live in the home. You also must receive consumer information from a HUD-approved counseling agency before obtaining the loan. You can contact the Housing Counseling Clearinghouse on (800) 569-4287 to get the name and telephone number of an approved counseling agency and a list of FHA approved lenders within your area.
Can I apply if I didn't buy my present house with FHA mortgage insurance? (Top)
Yes. It doesn't matter if your earlier mortgage was not insured by FHA. Your new FHA reverse mortgage will be a new FHA-insured mortgage loan.
What types of homes are eligible? (Top)
Your home must be a single family dwelling or a two-to-four unit property that you own and occupy. Townhouses, detached homes, units in condominiums and some manufactured homes are eligible. Condominiums must be FHA-approved. Call 1-800-CALL-FHA and ask if your condominium project is FHA-approved. Don't get discouraged if it isn't, there is still an alternative. Ask your lender if it is possible for to qualify your project under the Spot Loan program. Do not sign any papers until you are certain that your project qualifies.
What's the difference between a reverse mortgage and a bank home equity loan? (Top)
With a traditional second mortgage, or a home equity line of credit, you must have sufficient income in relation to debt to qualify for the loan, and you are required to make monthly mortgage payments. The reverse mortgage is different because it pays you, and is available regardless of your current income. The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or the FHA's mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are and the lower the interest, the more you can borrow. You don't make payments, because the loan is not due as long as the house is your principal residence. Like all homeowners, you still are required to pay your real estate taxes, hazard insurance and other property charges. Unlike a traditional second mortgage, with an FHA-insured HECM, you cannot be foreclosed or forced to vacate your house because you don’t make your principal and interest payments
Can the lender take my home away if I outlive the loan? No! You do not need to repay the loan as long as you or one of the borrowers continues to occupy the property as the primary residence, keep the taxes and insurance current and perform the other obligations of the mortgage.
Will I still have an estate that I can leave to my heirs? (Top)
When you sell your home or no longer use it for your primary residence, you or your estate will repay the cash you received from the reverse mortgage, plus interest and other fees, to the lender. The remaining equity in your home, if any, belongs to you or to your heirs. None of your other assets will be affected by the FHA's reverse mortgage loan. This debt will never be passed along to the estate or heirs.
How much money can I get from my home? (Top)
The amount you can borrow depends on your age, the current interest rate, and the appraised value of your home or FHA's mortgage limits for your area, whichever is less. Generally, the more valuable your home is, the older you are, and the lower the interest, the more you can borrow.
Should I use the services of a firm that will give me the name of a lender for a “small percentage” of the loan? (Top)
FHA does not recommend using an estate planning service, or any service that charges a fee simply for referring a borrower to a lender. FHA provides this information without cost. HUD-approved housing counseling agencies are available (for free or at minimal cost) to provide consumer education information, counseling, and a listing of HUD-approved lenders for free. Call toll-free (800) 569-4287 for the name and location of a HUD-approved housing counseling agency near you.
How do I receive my payments? (Top)
You have five options:
- Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
- Term - equal monthly payments for a fixed number of months selected.
- Line of Credit - unscheduled payments or in installments, at times and amounts of your choosing until the line of credit is exhausted.
- Modified Tenure - combination of line of credit and monthly payments for as long as the borrower remains in the home.
- Modified Term - combination of line of credit and monthly payments for a fixed period of months which you choose
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