The reverse mortgage product was developed as a way to help retirees with limited income use the equity in their homes as away to cover basic monthly living expenses and health care. The loan is called a reverse mortgage because instead of making monthly payments to a lender, the lender makes payments to the borrower. The borrower is expected to meet certain program requirements to be eligible for the Reverse Mortgage loan program. Qualifications for a reverse mortgage require borrowers meet three essential requirements: be at least 62 years of age, live in the home as your primary residence and have paid off much or all of your traditional mortgage. In addition to the three requirements, you must meet with a HECM counselor to discuss your eligibility requirements, financial ramifications, alternatives to the reverse mortgage, and repaying your mortgage loan. Upon completion of counseling, borrowers should be able to make an independent and informed decision on whether the reverse mortgage product will meet their specific financial situation.
Qualifications for a reverse mortgage include:
You must be at least 62 years of age.
You must hold title to your home and live in your home as your primary residence. A reverse mortgage cannot be used on a second home or investment property.
You must have paid of all or most of your mortgage balance.
Obligations as a borrower includes the following:
Continue paying your homeowners insurance.
Continue paying your property taxes.
Continue with your basic home maintenance and repairs.
You must use reverse mortgage loan funds to pay off any other mortgage you may have.
Comply with all loan terms, such as living in the home as your primary residence.
HECM Government Regulations include the following:
Before application, you must complete a counseling session with an FHA-approved counselor. This counselor will help educate you on the reverse mortgage loan and make sure you know all your options.
Lenders must complete a financial assessment to analyze income against expenses. Although your income is not used to qualify you for the loan, if the ratios show that you have difficulty paying recurring taxes, insurance or other obligations, you may need to set aside money from your loan funds to pay your financial obligations.
To qualify for a reverse mortgage your type of home must also be eligible. Homes that meet FHA guidelines include:
Single family home or a two-to-four unit home (you must occupy at least one of the units)
A HUD-approved condominium unit or townhouse
A manufactured home that meets specific FHA requirements (built after 1976)