FHA Reverse Mortgages
Seniors who are older than 62 may have the ability to borrow through an FHA reverse mortgage. A reverse mortgage allows a homeowner who has paid down most of their mortgage or paid off the home to borrow from the value of it. An FHA reverse mortgage is one that is provided with a guarantee through the Federal Housing Administration. For many people, this type of loan can be an ideal investment to supplement their retirement income.
What Is the FHA Reverse Mortgage Program?
The FHA reverse mortgage program, also known as the Home Equity Conversation Mortgage or HECM, is available to those who are over the age of 62. It allows for a homeowner to withdraw some of the home’s equity to use as they would like to throughout their lifetimes. Many times, an FHA reverse mortgage loan can help with:
- Providing a steady stream of income throughout retirement years
- Provide seniors with a way to pay for medical bills or other debts
- It can also be used to purchase a primary residence if they plan to use cash on hand to pay the difference between the loan and the cost to purchase the price
The FHA reverse mortgage program has various restrictions. Individuals who wish to obtain this or a non-FHA reverse mortgage will need to meet with a counselor to discuss their options. It is important for individuals to understand how payment is made on the property. FHA reverse mortgage lenders can offer some information and guidance but meeting with a third-party counselor is necessary to ensure this decision is a wise one.
FHA Reverse Mortgage Guidelines
FHA reverse mortgage guidelines are very specific. Anyone who meets with and speaks to FHA reverse mortgage lenders will need to understand these terms carefully. The following are some of the best FHA reverse mortgage rules:
- Individuals must be at least 62 years of age as the homeowner of the property.
- Seniors must own the property outright or have paid down most of the existing mortgage on the property.
- They must live in the home as their primary residence – this applies for a non-FHA reverse mortgage as well.
- They cannot have any type of delinquent federal debt.
- They must be able to make other payments, including insurance and tax obligations. FHA reverse mortgage insurance must be available as well.
- They must have an information session with a HUD-approved counselor.
- FHA reverse mortgage lenders will also provide some specific requirements in most cases. This may include limitations on repayment and costs.
Other FHA Reverse Mortgage Guidelines: The Property Requirements
- Additional FHA reverse mortgage rules apply to the property itself. They include:
- The property must be a single-family home or a two to four unit property; the borrower must live in one unit.
- Manufactured homes that meet FHA requirements may qualify.
- Some condo projects may qualify.
Other FHA reverse mortgage rules will apply to the property itself. For example, there are various options including a line of credit or a lump sum payment. In addition, the senior may wish to make payments on the loan during their lifetime. Most of the time, though, an FHA reverse mortgage loan does not require payments to be made. Rather, at the time of the person’s death or when he or she moves out of the home, the loan becomes due. If the heirs do not wish to repay the FHA reverse mortgage loan, the home may be sold to repay the debt.
As with all non-FHA reverse mortgage loans, it may be necessary for individuals to have FHA reverse mortgage insurance. It helps to minimize risks to the lender. Seniors who need a source of income during their lifetime and they do not plan to sell their home or will it, will benefit the most from an FHA reverse mortgage loan.
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