May 20, 2009
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.
NON-FHA HOMES
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.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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