FHA Reverse Mortgages, also known as Home Equity Conversion Mortgages or HECM loans, are designed for qualified borrowers aged 62 or older who own their home or have very few payments left on the home. There are three basic types of FHA HECM loans:
- Traditional (Equity in current property used to obtain a new HECM loan)
- Purchase (HECM loan proceeds used to purchase a principal residence)
- Refinance (Refinance of an existing HECM loan with a new HECM loan)
The FHA loan rulebook, HUD 4155.1, says of HECM loans that the following properties can be used to secure the reverse mortgage/HECM:
- 1 Unit (Single Family Residence)
- 2-4 Unit with one unit occupied by the borrower
- HUD-approved Condominium Project
- Manufactured home built after June 15, 1976
Borrowers who are age-eligible to apply for an FHA HECM must not be delinquent on any federal debt, and must complete required housing counseling directly related to HECM loans. This counseling is required as a condition of loan approval, and the borrower can get an FHA referral to an FHA/HUD approved housing counselor by calling 1-800 CALL FHA.
According to FHA documents (the FHA HECM Industry Factsheet), HECM loans feature no monthly mortgage payment and only become due and payable under certain conditions. Those conditions include the death of the borrower.
But the HECM loan can become due and payable in full if the borrower fails to pay property taxes/charges or live up to the mortgage obligations specified in the loan agreement. A borrower, for example, who stops using the home that secured the HECM as his or her primary residence could find their HECM loan due in full.
FHA HECM mortgages are available from participating lenders. You can find out more about the loan or about FHA HECM required counseling by calling 1-800 CALL FHA.
Do you have questions about FHA reverse mortgages? Ask us in the comments section. You can apply or get pre-approved for an FHA HECM at www.FHA.com (a private company, not a government agency).