FHA Reverse Mortgages For Senior Homeowners And Guidelines

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FHA Reverse Mortgages For Senior Homeowners And Guidelines

This BLOG On FHA Reverse Mortgages For Senior Homeowners And Guidelines Was Updated On November 13th, 2018

Homeowners who are 62 years old or older can qualify for FHA Reverse Mortgages.

  • Reverse Mortgages are ideal for retired homeowners with limited fixed income such as pension or social security income
  • Seniors with not enough income to qualify for a traditional cash-out FHA or Conventional Loan, then FHA Reverse Mortgages may be the perfect loan program for them
  • The only requirement is that homeowners have enough equity in their homes
  • The higher the equity in home the more cash-out refinance proceeds homeowners can get
  • The older the homeowner is the higher the loan to value cap 

What Are FHA Reverse Mortgages?

FHA Reverse Mortgages is also called a home equity conversion mortgage (HECM).

FHA Reverse Mortgages are special types of refinance mortgage loans:

  • Allows homeowners age 62 or older possible to tap the equity in their homes
  • There are various options of distribution plans reverse mortgages offer to borrowers

Disbursements from reverse mortgages are the following:

  • It may be a lump sum that they can take out at once and use it for any reason 
  • It may be stream of regular payments paid over the life of the homeowner

No Monthly Payments On Mortgage Required

Unlike traditional home equity loans, there are no monthly payment requirements on FHA reverse mortgages.

  • Homeowners do not have to pay a single mortgage payment as long as they occupy the home
  • The home to be eligible for FHA reverse mortgages need to be an owner occupant home

Reverse mortgage borrowers must have to reside in the home they are taking out the reverse mortgage from. Need to stay current on their property taxes and insurance.

  • Disbursements may be used to supplement social security, meet unexpected medical expenses, make home improvements, and more
  • The equity built up over years of home mortgage payments can be paid to the reverse mortgage borrower
  • But unlike a traditional home equity loan or second mortgage, no repayment is required until you no longer use the home as their principal residence or you decide to sell their home

FHA Reverse Mortgages Eligibility Requirements

Reverse mortgage borrowers and any co-borrowers, must be at least 62 years old to qualify.

Here are the basic requirements:

  • Reverse borrowers need to own their home free and clear or have a very low mortgage balance
  • The home must be principal residence
  • May be a single-family or 2 to 4 unit dwelling
  • Condominiums and Planned Unit Developments (PUDs) may be eligible if they are in HUD-approved developments
  • Borrowers do not need a job to qualify for reverse mortgages
  • Borrowers are required to attend and complete a Federal required housing counseling course

Unlike ordinary loans, a reverse mortgage does not require repayment as long as as homeowners live in their home. Principal, plus interest is recovered when the home is sold. The remaining value of the home goes to you or your survivors.

Loan Limits

The maximum amount of a reverse mortgage varies by geographic area and changes frequently.

  • Normally the maximum value of the subject property cannot exceed $650,000
  • If it does, they will not go beyond the $650,000 value
  • The amount borrowers can borrow (LTV) depends on their age
  • The older a borrower is, the more they can borrow
  • Please contact us at Gustan Cho Associates Mortgage Group for the maximum mortgage amount for your area

Cash Disbursements

There are five options borrowers can choose from for receiving cash disbursements.

They are not limited to a single option. As their needs changes, reverse mortgage borrowers may change from among the following reverse mortgage disbursement options:

  1. Tenure – equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence
  2. Term – equal monthly payments for a fixed period of months selected
  3. Line of Credit – unscheduled payments or in installments, at times and in amounts of your choosing until the line of credit is exhausted
  4. Modified Tenure – combination of line of credit with monthly payments for as long as you remain in the home
  5. Modified Term – combination of line of credit with monthly payments for a fixed period of months selected by borrowers

Remember that repayment of FHA reverse mortgages does not start until the homeowner no longer occupies the home as their principal residence. Homeowners of FHA reverse mortgages will be responsible for making insurance and property tax payments but payments on the reverse mortgage do not begin until they no longer occupy your home.

It is mandatory that a reverse mortgage borrower seek professional credit counseling prior to closing on a reverse mortgage refinance loan.

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