April 2, 2024
As further news comes in about improving housing market conditions (however slowly the market may improve), some homeowners are again thinking about their options, including FHA refinance loans and programs that let borrowers take the equity in their homes out in cash.
For those reviewing FHA loans, options can include cash-out refinancing as well as an option for those 62 or older who own their homes or have nearly paid them off.
FHA Reverse Mortgage Facts
The FHA reverse mortgage allows a qualified borrower to get cash at closing time on a loan that is not due until the borrower dies, sells the home, or stops using it as their home address.
Borrowers do not make mortgage payments with an FHA reverse mortgage. However, there are payments to be made. The homeowner must stay current on property taxes and homeowner association dues as a condition of the loan.
What’s Unique About FHA Reverse Mortgages
FHA reverse mortgages are only for borrowers 62 or older. Younger borrowers can’t qualify for a reverse mortgage. They must apply for an FHA cash-out refinance loan to withdraw equity from the home in cash.
The FHA reverse mortgage program differs from the FHA cash-out refinance option in important ways. For example, FHA reverse mortgage counseling is a requirement, while there is no equivalent requirement for cash-out loans.
One reason for this very important requirement? The tax issue mentioned above.
Reverse mortgage borrowers should know what happens if they fall behind on property taxes.
In such cases, the owners could have their FHA reverse mortgage declared due. That is one important reason why reverse mortgage counseling is required as a condition of loan approval for these mortgages.
Qualifying Homes For FHA Reverse Mortgages
According to HUD, the following property types could qualify for an FHA reverse mortgage:
- Single-family houses
- Owner-occupied 2-4 unit properties
- HUD-approved condominium project or unit
- FHA-approved manufactured housing
Before Applying For A HECM
A reverse mortgage or FHA Home Equity Conversion Mortgage is best approached after you spend some time saving for the loan to make the most of it. Don’t let your cash out be eaten up by fees and closing costs. Paying these in cash will help you get more out of the HECM.
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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