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Qualifying For HUD Reverse Mortgages For Seniors

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Qualifying For HUD Reverse Mortgages For Seniors

This BLOG On Qualifying For HUD Reverse Mortgages For Seniors Was UPDATED On May 17th, 2018

Many people, especially those who have been in their homes for a very long time, find themselves sitting on significant equity. The United States Department Of Housing And Urban Development (HUD), the parent of FHA, has created HUD Reverse Mortgages for seniors. Borrowers can purchase a home with HUD Reverse Mortgages and can refinance their existing homes and not worry about making a single mortgage payment for the rest of their lives as long as they own the home.

  • The homeowners have probably paid off the home
  • Homes has likely appreciated over the years
  • They have also likely made improvements over time, further enhancing the home’s value
  • HUD Reverse Mortgages is a means of turning the value of home ownership into cash
  • All or part of the equity in the home can be converted into cash without having to sell the home
  • Or taking on additional monthly bills, as would be the case with taking on a second mortgage
  • To be eligible for HUD reverse mortgages, homeowners must be 62 years of age or older
  • Homeowners need to have equity in their homes to qualify for HUD Reverse Mortgages

Comparing Reverse And Traditional Mortgages

  • A reverse mortgage is best explained by comparing it to traditional or “forward” mortgage
  • With government and conforming loans, mortgage lenders checks the borrower’s income and credit history
  • It also appraises the home with a home appraisal to ensure that its market value is sufficient to support the loan
  • The mortgagor borrows money from the lender using the home as collateral
  • Homeowner pays the lender each month an amount representing principal and interest
  • As the debt is paid down, the borrower’s equity in the home grows
  • Homes can also increase in value with market appreciation 

How Does HUD Reverse Mortgages Work?

A reverse mortgage works in the opposite way.

  • The homeowner receives money from the lender based on the home’s appraised value
  • The loan’s collateral is the home’s equity, or its appraised value
  • Homeowner doesn’t make any monthly payments to the lender
  • There are reverse mortgage programs where lender makes payments to the homeowner each month (or in whatever way the terms of the reverse mortgage have been established)
  • The term and conditions of reverse mortgages depends on appraised value of home
  • There is no minimum amount of income to qualify for a reverse mortgage unlike traditional forward purchase home loans
  • Homeowners does not need any income to qualify for HUD Reverse Mortgages 

Equity Is Required To Qualify For Reverse Mortgage

With a reverse mortgage, the homeowner is increasing the debt on the home by taking the equity they have in their home in cash. No repayments are made until the home passes or sells the home. The result of a reverse mortgage is just the opposite of traditional forward home loans:

  • mortgage loan balance increases every month
  • debt increases and the home equity decreases
  • The mortgage loan balance amount owed increases every year
  • Homeowners who live over a 100 years old still do not have to worry about making any payments on FHA Reverse Mortgages

The loan does not have to be repaid until the owner dies, moves from the home, sells the home, or fails to maintain it properly, keep it insured, or pay property taxes. The final payment to the lender is typically structured not to exceed the home’s selling price.

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