Reverse Mortgage Guidelines
To help familiarize yourself with Home Equity Conversion Mortgages (HECMs), more commonly known as reverse mortgages, it’s best to understand the basics first, then speak with a mortgage professional to see if a reverse mortgage makes sense in your situation. Keep in mind that the following guidelines are only to provide a general overview of reverse mortgages, and different lenders may have additional requirements for approval.
How It Works
In a reverse mortgage, the borrower is freed from having to make monthly payments to their lender and receives money instead. The money can be taken in a lump sum, equal monthly payments, or a combination of the two. The loan does not have to be repaid until the borrower(s) no longer use the property as their primary residence – either through death of the borrower, sale of the home, or changing the property from a full-time residence to a second home or rental property.
Borrower Eligibility Requirements
Reverse mortgages are designed for senior citizens who own their homes outright or have a decent amount of equity built up in their homes. Only borrowers age 62 or older can qualify for a reverse mortgage loan.
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Other Eligibility Requirements
In addition to the age restriction and property ownership requirements, the following criteria must be met in order to be approved for a reverse mortgage:
- The property must be used as a primary residence.
- The borrower cannot be delinquent on any federal debt, such as owing back taxes.
- The borrower must agree to participate in a homeownership counseling program given by a HUD-approved HECM counselor.
When it comes to taking out a reverse mortgage, the property must meet certain requirements. The following property types are eligible for reverse mortgage financing, as long as they meet all FHA property standards and flood requirements:
- Single-family homes
- Multi-unit properties with up to 4 units (as long as the borrower occupies one of the units as their primary residence)
- HUD-approved condominiums
- Manufactured homes that meet FHA requirements
Reverse Mortgage Income Guidelines
When applying for a reverse mortgage, your income, assets, monthly living expenses, and credit history will likely need to be verified. Speak with an Alpha Mortgage Reverse specialist for specific income and credit requirements.
Property Tax & Insurance Obligations
Although you aren’t required to make mortgage payments in a reverse loan, you will still need to keep your property taxes and insurance premiums up-to-date. Failing to make these payments is grounds for the lender to call the mortgage due, even if you’re still occupying the home as your primary residence. This is an important point to consider when deciding whether or not to take out a reverse mortgage. If you’re unsure about your ability to meet these financial obligations, then a reverse mortgage may be a risky choice
Where To Go For Further Information
Taking out a reverse mortgage can be a valuable part of an overall retirement plan, as it can help seniors supplement their fixed incomes or help them pay for major expenses. However, it may not be the best option for everyone. To learn more about reverse mortgage programs, talk to an experienced loan expert from Alpha Mortgage’s Reverse Division.