What is an FHA Reverse Mortgage?
There are many programs and home loan products that allow homeowners to
take advantage of the equity they've built up in their homes. One
resource qualified FHA mortgage holders have at their disposal is the
Home Equity Conversion Mortgage (HECM) loan, also known as an FHA
reverse mortgage. FHA HECM loans are like other home equity loans--they
let you cash in on part of the value a home has built up over the
years. But the FHA reverse mortgage is unique because FHA borrowers
don't make any payments on FHA HECM loans until they stop using the
home as their principal residence. There are no mortgage payments due
until you stop using the home as a primary residence.
Since a "principal residence" is defined as the place where the
borrower does the majority of their dwelling, using summer homes, time
shares or RVs doesn't disqualify you from an FHA HECM loan. As long as
you meet the requirements for an FHA HECM loan and use the property as
your main address, you can take the cash value of your home's equity to
use in any number of ways.
QUALIFYING FOR FHA REVERSE MORTGAGE OR HECM LOANS
To qualify for an FHA reverse mortgage, you must be at least 62 years
old. You must own your home, or have a low enough balance that the FHA
reverse mortgage loan will pay off the outstanding amount when the HECM
loan is approved. Like other FHA loans and FHA mortgages, the property
must be either a single-family residence or a one to four unit property
where the borrower occupies one of the units.
Condos and manufactured homes qualify, but only if they meet FHA requirements.
FHA reverse mortgages are also different than conventional reverse
mortgages or HECM loans because the borrower is required to get
financial counseling from an approved HECM counselor. This is a
condition of the loan and is non-negotiable. The Department of Housing
and Urban Development recommends searching for an approved counselor by
calling the Housing Counseling Clearinghouse at 1-800-569-4287.
NON-FHA HOMES
It doesn't matter if you purchased your home with a conventional loan
or an FHA mortgage. As long as you meet FHA and HUD requirements for
approval, you can use an FHA reverse mortgage to claim the cash value
equivalent for the equity in your home.
One of the conditions of the FHA reverse mortgage is that you aren't
allowed to owe more than the home is worth. The amount of your loan is
determined by interest rates, your credit report, and by the appraised
value of the property. If you are approved for an FHA reverse mortgage
or HECM, you must pay off any remaining balance at closing time on your
new loan. As with any other FHA home loan, you are still responsible
for paying property taxes, insurance, and related bills.
Like other FHA mortgage products, your application must be made through
an FHA approved lender. If your current financial institution does not
participate in FHA loan programs, look up the local FHA-approved banks
in your area to get started.
From FHA.com