Monthly Archives: May 2009
When you take out an FHA reverse mortgage or HECM, no payments are due until you sell the home. Did you know there are other situations that could make your loan come due? Here are four situations to be aware of that cause your FHA reverse mortgage to come due even if you haven’t sold your home.
FAILURE TO PAY FEDERAL DEBTS
The terms of your FHA reverse mortgage require timely payment of property taxes, hazard insurance, and any other financial obligations listed in the terms of your FHA reverse mortgage agreement. If you don’t pay, the lender has the right to call in your loan. Make sure you fully understand your financial responsibilities before you sign your FHA HECM loan paperwork, including technical details such as grace periods, what to do if you have financial problems, and how to file for more time to pay if needed.
CHANGING PRIMARY RESIDENCES
If the FHA reverse mortgage property stops being your primary residence, your FHA HECM loan comes due as per the terms of the loan contract. Do you know how long you can live in your summer home or RV before you risk the FHA reverse mortgage loan coming due? What does your bank consider a summer home? What’s considered a primary residence? Your loan paperwork spells this out in detail–don’t assume you’re safe, know the exact terms of your FHA HECM loan requirements before you sign. Every loan contract should be considered unique–don’t assume a friend or relative’s loan terms apply to your agreement with the bank.
A YEAR OR MORE AWAY
It’s easy to take out an FHA reverse mortgage with the assumption that you will remain in the property long-term, and obey the terms of your agreement to the letter. Sometimes our best intentions are thwarted by accidents and other unexpected events. What happens if you get sick or injured and need extended care? If you require a prolonged stay a nursing home or assisted living facility your FHA HECM loan could be in jeopardy. Ask your loan officer for advice on adding a second resident to your FHA reverse mortgage or make contingency plans for in-home care if it’s needed. You may be able to avoid your FHA reverse mortgage coming due simply by making extended care arrangements ahead of time, just in case. The rules for HECM loans state you can’t be away from the property for longer than 12 months.
PROPERTY IN DISREPAIR
FHA reverse mortgage agreements are clear–you must keep the home in good condition. This may be a simple matter while you are in residence, but what happens when you take an extended trip or spend a long vacation in a summer home? If the property falls into disrepair while you are gone, your FHA loan could become due. Remember to anticipate the unexpected while you are gone from storms or natural disasters to vandalism or other damage that could happen in your absence. Arrange for someone to look after your investment while you are away. Not only will you protect your FHA mortgage, but you’ll also have the peace of mind that comes from knowing your valuable property is being looked after while you are out.
Homeowners who want to take advantage of the equity built up in their homes over the years have conventional loan options to choose from, but did you know the FHA also offers reverse mortgages to those who qualify? The FHA offers Home Equity Conversion Mortgage (HECM) loans, also known as FHA reverse mortgages. FHA HECM loans are like other home equity loans because they let you cash in your equity; FHA reverse mortgages are unique because FHA borrowers don’t make any payments on FHA HECM loans until they stop using the home as their principal residence. No mortgage payments come due until you stop using the home as your primary residence.
Since “primary residence” is defined as the place where the borrower does the majority of their dwelling, HECM loans aren’t intended for summer homes, but owning one does not disqualify you from using an FHA reverse mortgage. As long as you meet the requirements for an FHA HECM loan you can take the cash value of your home’s equity to use in a variety of ways.
FHA REVERSE MORTGAGES – WHO QUALIFIES?
FHA reverse mortgages are for applicants who are at least 62 years old. FHA HECM rules state you must own the property outright or have a loan balance so low that the FHA reverse mortgage loan will pay off the outstanding amount. Your property must be either a single-family residence or a multi-unit property (one to four units) that you call your primary residence. Condos and manufactured homes do qualify for FHA HECM loans if they meet FHA requirements.
FHA reverse mortgages require the borrower to get financial counseling from an approved HECM counselor. The Department of Housing and Urban Development recommends finding for an approved counselor through the Housing Counseling Clearinghouse. Call them at 1-800-569-4287 for more information. Another requirement to qualify for an FHA reverse mortgage–you must be current on all federal debts.
You may qualify for an FHA HECM loan or reverse mortgage whether you originally purchased the home with a conventional loan or an FHA home loan. One condition of the FHA reverse mortgage is that you aren’t allowed to owe more on the loan than the appraised value of the property. The amount of your FHA reverse mortgage loan is determined by several factors including interest rates, credit report, plus the appraised value of the property. Similar to other FHA loans, you must apply for an FHA reverse mortgage through an FHA-approved lender. You can get help finding a local lender by calling the FHA at 1-800-225-5342.