Now that you are at least 62 years old and living in your primary residence with the deed under your name, you want to enjoy the remaining years of your life with financial freedom. You may have decided to apply for a Federal Housing Administration (FHA) reverse mortgage or HECM (Home Equity Conversion Mortgage). What else do you need to know?
FHA reverse mortgage guidelines.
There are considerations when applying for a reverse mortgage. Under FHA guidelines, cooperative housing owners are not qualified to apply for a reverse mortgage because the applicant must be the one who owns the property – meaning the deed must be under the applicant’s name.
Cooperative house owners may not be eligible, but those who own a house, condo, townhouse, or if you own a manufactured home that was built from June 15, 1976, onwards may be qualified.
These are some of the guidelines you must know:
- Must be at least 62 years old.
- A primary homeowner with at least 50% equity.
- Prepare to pay the following:
- up-front insurance premium
- origination fee
- mortgage insurance premiums
- loan servicing
One of the benefits of having an FHA reverse mortgage is that the lender cannot go after the borrower or their heirs if the value of the property goes down when it is time to sell it. Once the primary borrower passes, the lender must also give the heirs a few months to decide if they want to repay the HECM or give the lender the freedom to sell the property to pay off the loan.
Once that you are approved in your reverse mortgage application, make sure that you continue living in your home and keep the house in top condition. It is also your responsibility to be updated on your homeowner’s insurance and property taxes as well. If you are going to live somewhere for over a year or maybe transfer to a health care facility, you may be forced to sell the house to repay your HECM. Talk to a loan officer for updated information about the reverse mortgage.