FHA Reverse Mortgage
Reverse mortgages have become increasingly popular with seniors who have equity in their homes and want to supplement their income. The FHA insures a reverse mortgage called the Home Equity Conversion Mortgage (HECM) that is available through FHA-approved lenders. These loans are available to homeowners aged 62 or older who have paid off or paid down a considerable amount of their mortgage.
How it Works
The FHA’s reverse mortgage program lets you to withdraw a portion of your home's equity. The amount that will be available for withdrawal varies by borrower. It depends on the age of the youngest borrower or eligible non-borrowing spouse, the current interest rate, and lesser of the appraised value or the HECM FHA mortgage limit or the sales price.
Funds can be received in the following formats:
- Equal monthly payments for the rest of your life.
- Equal monthly payment for an agreed period.
- A line of credit, though there are caps on the size of some lump-sum withdrawals.
The principal and interest are due for repayment when the home is sold, or when the borrower dies. FHA mortgage insurance is also required with such a loan, which can be financed as part of the loan as well.
Who's it For?
To be eligible for an FHA reverse mortgage, you need to be compliant with the eligibility criteria.
- You must be 62 years or older.
- You must own the home outright or paid-down a considerable amount.
- You must occupy the home as your primary residence.
- You must remain current on property taxes, homeowner’s insurance, and other mandatory obligations.
- You must participate in a consumer information session led by a HUD-approved counselor.
- You must maintain your property and keep it in good working condition.
- You must complete a consumer information session given by a HUD-approved HECM counselor.
There are also some property guidelines your house must fall under to be eligible for an HECM. It must be a single-family home or 2- to 4-unit home with one unit occupied by the borrower, a HUD-approved condominium project, or a manufactured home that meets FHA requirements.
FHA Loan Articles
November 2, 2021Interest rates started to decline in 2019 and still seem considerably low. The average rate for a 30-year, fixed rate home loan has fallen from 4.94% in November 2018 to 3.13% in October 2021. A point drop in your interest rate could translate to huge savings with each monthly payment
October 30, 2021The FHA Rehabilitation Loan program allows lenders to cover the purchase or refinance, as well as the rehabilitation of the home, as part of a single mortgage. This loan can be used to finance a property that is at least one year old with a total cost of repairs amounting to at least $5,000
July 30, 2021The FHA Streamline Refinance allows mortgage holders to refinance their home loan without going through the process of second appraisal. Since this is a step that was completed with the first FHA mortgage, the FHA waives it for the refinance
July 14, 2021Making the decision to buy a house is a big one, followed by the choice of which house to buy. The next biggest decision you make is going to be the type of home loan you need to go through with the purchase. One option for financing your home is an FHA loan.
May 24, 2021With historically low interest rates, the mortgage industry has seen a sharp uptick in refinances. Taking advantage of the current market might be in your best interest and could lower your monthly payment significantly. Don’t forget that refinancing a mortgage comes with closing costs.
April 11, 2021With the trend of falling interest rates since 2019, the number of mortgage refinances around the country has spiked and continues to rise. Borrowers with FHA loans can also capitalize on the low rates, but it may be possible to simplify the process with the FHA Streamline Refinance.
