Reverse Mortgage for a Condo
One of the most frequently asked questions about reverse home loans, is whether you can obtain a reverse mortgage for a condo. The answer is yes, as long as the unit and project meet all FHA property standards and as long as the borrower meets all additional criteria for approval.
How does the lender determine if a condo is eligible for a reverse mortgage?
In most cases, your lender will determine if your condo is eligible by checking to see if the community is already HUD-approved. In the past, lenders could conduct what was known as a “spot approval” to determine a condo’s eligibility. A spot approval allowed lenders to review only a minimum amount of information to see if the property met HUD’s specific guidelines on those issues. As of February 1, 2010 however, spot approvals were no longer allowed and only borrowers with homes located in fully HUD-approved projects would be eligible for FHA-insured loans, including home equity conversion mortgages.
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What if my condo is not already HUD-approved?
If you would like to take out a reverse mortgage for a condo that is not already established with the HUD, then your lender will need to gather all the necessary documentation and present it to the HUD for approval before they can approve you for a loan.
This process can take some time to complete, so it’s important to factor this in to your anticipated reverse mortgage timeline. Your lender will need to get copies of CC&Rs, by-laws, articles of incorporation, current HOA budget, verification of adequate reserves, current HOA certification citing things like owner occupancy ratios, percentage of owners delinquent on HOA dues, and so on. Then, once everything is gathered and submitted to HUD for review, it can take several weeks for HUD to complete their review.