Reverse mortgages have been around for many years. The programs
have been enhanced and now have FHA and HUD backing which makes them
more popular as a vehicle for long term retirement planning.
What is a reverse mortgage?
A reverse mortgage is a special type of home loan that
lets a homeowner convert a portion of their home's equity into cash. Unlike
a traditional home equity loan or second mortgage, no repayment is required
until the borrower no longer uses the home as a principal residence.
A reverse mortgage can:
- Remove
all monthly mortgage payments
- Add
supplemental monthly income
- Add
a line of credit for unforeseen expenses
- Provide
financial security that allows the borrowers to live
in their primary home for the rest of their lives regardless
if one or more of the borrowers passes
Who qualifies for a reverse mortgage?
Any U.S. citizen or Non-permanent Resident Alien, 62
years of age or older, that owns a primary home with
a sufficient equity position.
Do you need good credit and income to qualify?
The answer to both is no. While a credit report is requested
on each file this is more to look for potential liens
against the property. The borrower's payment history
has no bearing on qualifying for this loan. Income
is requested but is also not used for qualification of
the loan.
Do all types of properties qualify for reverse mortgages?
No, Second Homes, Investment properties, true Condo-tels,
Mixed Use properties and Mobile or Manufactured homes
not attached to a permanent foundation will not qualify. In
addition rental properties with more than 4 units and
homes on leased land will not qualify. Condominiums in projects not
approved by FHA are not eligible for the FHA Home Equity Conversion
Mortgage, along with certain older mobile and manufactured homes.
What types of properties qualify for a reverse mortgage?
Single family dwellings or 2-4 unit property that you
own and occupy as your primary residence. In addition, town homes, detached
homes, units in condominiums and manufactured homes are eligible. Condominiums
must be FHA approved and the manufactured homes must
be attached to a permanent foundation.
