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
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September 2, 2023You may have heard the terms co-borrower and cosigner in connection with your FHA loan process, but aren't sure about the distinction. Both a co-borrower and a cosigner can help a primary borrower qualify for a mortgage, but they have different roles and responsibilities.
August 27, 2023The Federal Housing Administration has specific credit requirements and guidelines for borrowers looking to buy or refinance homes with an FHA loan. In addition to what FHA guidelines state, lenders may have more stringent requirements that may vary from one lender to another.
August 23, 2023Mortgage APR (Annual Percentage Rate) and a loan's interest rate are two different things, although they are closely related. Understanding the difference is an important part of a borrower's analysis of the true cost of their mortgage.
August 19, 2023FHA refinance loans allow homeowners with existing FHA loans to refinance their mortgages. These loans are designed to help borrowers take advantage of lower interest rates, reduce their monthly mortgage payments, or access equity in their homes for various purposes.
August 14, 2023FHA loans typically require a minimum down payment of 3.5% of the purchase price of the home with the right credit score. This means that if you're buying a house for $240,000, you would need to make a down payment of at least $8,400.
