Reverse Mortgage Qualification Information
A reverse mortgage can be an attractive way to turn home equity into cash without needing to worry about payments. Instead, those who take out reverse mortgages are allowed to live in their homes payment-free for as long as they live or until they decide to sell them. Because of the special nature of this type of loan, however, the qualifications also tend to be fairly unique.
Qualifications for FHA-Backed Reverse Mortgages
Around 90 percent of all reverse mortgages are backed by the Federal Housing Administration, which refers to them as “home equity conversion mortgages,” or HECMs. There are a number of requirements to qualify for this most common kind of reverse mortgage including:
- You and any co-borrowers must be at least 62 years old.
- The home must be your primary residence.
- The home must be owned outright or paid off to the point the reverse mortgage can be used to settle the existing loan.
- The home must be in good repair.
- You will have to meet with an approved counselor in order to ensure you are aware of basic Reverse Mortgage Information.
- You must not be delinquent on any financial obligations to the federal government, from income taxes to federally-backed loans of other sorts.
FHA HECM loans are by far the most common Reverse Mortgage Solutions, but there are others that can be useful in particular situations.
Single-Purpose Reverse Mortgages
These reverse mortgages are offered by some local and state governments, typically to assist lower-income people with needs they would otherwise lack the cash to take care of, such as paying property taxes or making specific kinds of home repairs.
As these programs differ from one to the next, qualifications will vary. In most cases, borrowers will need to come in under particular income levels and have specific needs in order to qualify in addition to meeting many of the requirements for FHA-backed reverse mortgages.
Private Reverse Mortgages
Private lenders also offer their own reverse mortgage programs without the backing of the FHA. Because they fall outside of the FHA’s purview, these qualifications for loans can sometimes be laxer than the more common, government-backed sort. Once again, however, each individual offering will have its own particular requirements.
The FHA’s HECM for Purchase Program
A final kind of reverse mortgage that bears mentioning is the FHA’s relatively new “HECM for Purchase.” This program was established to help seniors who might otherwise sell their existing homes, buy new, smaller ones, and immediately take out reverse mortgages on the latter, quickly incurring a slew of closing costs.
Under the HECM for Purchase Program, borrowers can, instead, take out a reverse mortgage on the first property and use it to buy the second, less-valuable home outright. An up-to-date Reverse Mortgage Calculator may help borrowers determine if this style of loan might make sense for them.
As with the single-purpose reverse mortgages offered by some state and local governments, this is the only allowable use of this kind of loan. Qualifications are otherwise the same as with other FHA-backed reverse mortgages.
Reverse Mortgage Qualification in a Nutshell
Since reverse mortgages do not need to be repaid until they are settled through the sale of the associated house, measures like credit score that are normally of great importance are irrelevant. Reverse mortgages do, however, involve a number of often-unique qualifications of other sorts, with the particular mix depending on the loan offering in question. In the final analysis, many prospective borrowers find qualifying for them relatively easy once these distinctive factors are taken into account.