Who can apply for an FHA reverse mortgage? Borrowing money to take advantage of the value in the home is not a new concept, but the reverse mortgage is a type of loan that’s quite different than a standard FHA refi loan.
What Is The FHA Reverse Mortgage?
A reverse mortgage is a loan that obligates the borrower without requiring monthly mortgage payments. FHA reverse mortgages, also known as Home Equity Conversion Mortgages or HECMs for short, offer the borrower cash or a line of credit in an amount agreed upon between the borrower and lender.
That amount is determined in part by the value of the home, so FHA HECM loans will require a new appraisal to see what the current fair market value of the property might be.
HECM Loan Mortgage Payments
HECM loans have no mortgage payment; the loan is due when the borrower dies or stops using the property as the primary residence.
HECM loans can be declared due in full if the borrower fails to maintain the property, keep up with property taxes, or other issues as defined in the loan agreement.
FHA Reverse Mortgage Rules For Applying
Applying for an FHA reverse mortgage or FHA HECM loan isn’t quite the same as applying for a new home purchase. Qualified borrowers must get reverse mortgage counseling from a HUD-approved housing counselor in order to successfully apply.
The reverse mortgage counseling is necessary to insure that all parties obligated on the mortgage understand the requirements of the loan and what can prevent it from becoming due and payable as a result of breaking the terms of the mortgage agreement.
FHA Reverse Mortgage Loan Age Requirements
The most important rule to know up front is the age requirement-HECM loans are only approved for financially qualified borrowers aged 62 or older.
HECM loans require occupancy-the borrower cannot get a HECM loan or FHA reverse mortgage on a house that is not the primary residence.
You cannot get approved for a HECM loan for time shares, vacation homes, or other intermittent occupancy type dwellings.