Articles in Category: Reverse Mortgage or HECM

January 21, 2016

Qualifying For An FHA Reverse Mortgage

One commonly asked question about the FHA home loan program is whether or not FHA insures or guarantees reverse mortgages. The FHA does have a reverse mortgage loan program, called the Home Equity Conversion Mortgage or HECM for short. Who qualifies for an FHA HECM loan and what are the basic ground rules? To start, it’s very important to understand the difference between an FHA HECM loan and traditional refinancing. According to the FHA official site, “A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that you built up over years of making mortgage payments can be paid to you.” FHA HECM loans are not like standard home equity loan or second mortgage | more...

January 14, 2016

FHA HECM Loan Facts

By Joe Wallace

The FHA single-family loan program includes reverse mortgages–a loan program where a borrower can apply for a loan that requires no monthly payments, offers cash back to the borrower, and is based on the value and equity in the home. If you are looking for a reverse mortgage, the FHA program might be just what you need. Here are some basic facts about the FHA reverse mortgage loan option: FACT: FHA reverse mortgages are known as Home Equity Conversion Mortgages or HECM for short. These two terms refer to the same thing when it comes to FHA reverse mortgages. FACT: FHA HECM loans are for borrowers aged 62 or older who either own their home outright or are very close to doing so. HECM loans are declared due when the | more...

January 13, 2016

FHA Refinance Loan Facts And Fictions

By Joe Wallace

If you are thinking about your refinance loan options in 2016, now is a good time to review some FHA refi facts. Planning for an FHA refinance loan is important, and if you start early the same way as preparing for the original purchase of your loan you may save yourself valuable time later on in the process. It’s important to take enough to time to review your recent credit history, make sure you have no late or missed payments in the 12 months leading up to the loan application, and make sure there are no errors or evidence of identity theft on your credit report. Here are some basic facts–and fictions–about FHA refinancing: FACT: FHA refinance loans are available for existing FHA loans and non-FHA mortgages alike. You can | more...

January 12, 2016

FHA Refinance Loans And FICO Scores

By Joe Wallace

Are you considering an FHA refinance loan? Are you concerned about your credit scores, or whether and new loan will require a credit check? There are some important issues to keep in mind about FHA refinancing that can help you in the planning stages of your new loan application. First, not all FHA refinance loans have an FHA-required credit check. FHA Streamline refinance loans (for existing FHA home loans only) have no FHA requirements for a new credit check though your lender may require one anyway. That is permitted under the rules for FHA refinances. FHA Streamline refinance loans are intended for owner-occupied homes that were originally purchased with an FHA mortgage. However, the borrower does not have to stay with the original lender that issued the loan. You are | more...

December 23, 2015

HUD 4000.1 On FHA Refinance Loans

By Joe Wallace

When the new FHA single family home loan rulebook , HUD 4000.1, was released, it contained updates, revisions, restatements, and clarifications of FHA home loan policy. We’ve been examining critical areas of HUD 4000.1 and discussing them here. One of those critical areas involves the FHA loan rules for refinance loans. What does HUD 4000.1 say about refinancing in general? Let’s begin with how the FHA now defines refinance loan transactions: “A Refinance Transaction is used to pay off the existing debt or to withdraw equity from the Property with the proceeds of a new Mortgage for a Borrower with legal title to the subject Property.” Then there are the types of refinance loan transactions as described in HUD 4000.1, starting with cash-out loans: “(1) Cash-Out A Cash-Out Refinance is | more...

December 14, 2015

FHA HECM Loan Limits For 2016

By Joe Wallace

The FHA has published the new mortgage loan guaranty limits for FHA Home Equity Conversion Mortgages for 2016. According to FHA Mortgagee Letter 2015-29, the new limits take effect for all FHA HECM loans with FHA case numbers assigned on or after 1 January 2016. According to the Mortgagee Letter, the 2016 limits are as follows: “For the period January 1, 2016 through December 31, 2016, the maximum claim amount for FHA-insured HECMs will remain $625,500 (150 percent of Federal Home Loan Mortgage Corporations (Freddie Mac) national conforming limit of $417,000). This maximum claim amount of $625,500 is also applicable to Freddie Macs special exception areas: Alaska, Hawaii, Guam, and the Virgin Islands.” FHA publishes new loan guaranty limits every year, making adjustments where necessary for housing market changes and | more...

When Is An FHA Loan Better Than A Conventional Loan?

October 27, 2015

FHA HECM Loans And Mandatory Counseling

By Joe Wallace

FHA HECM loans–home equity conversion mortgages, sometimes known as “reverse mortgages”–come with a requirement for all borrowers to be obligated on the FHA HECM to go through HECM loan counseling. This is not a requirement for other types of FHA mortgages, which leads some to wonder why FHA HECMs have this feature. Why do the borrowers have to complete FHA required counseling sessions as a condition of the loan? There are many reasons. Since HECM loans feature no monthly payments, cash back to the borrower, and specific requirements for that cash back, counseling is necessary for the applicants to know exactly what they can and cannot get with their HECM loans. This FHA loan program has changed a great deal in the last two years, and the terms and | more...

September 28, 2015

FHA HECM Loans and Death Of The Primary Borrower

By Joe Wallace

We get many questions about FHA HECM loan rules. Some of those questions have to do with the legal rights and/or obligations associated with HECM loans for primary borrowers and what happens to the non-borrowing occupant if the borrower dies (in terms of ownership and occupancy of the property). Here’s a recent question that showed up in the comments section: “Several years ago my father and I took out a Reverse Mortgage on our home. He had to be the primary borrower because of his age and I was and still am not 62. I am a co-owner of the house and my name is on the deed. I had to go through the counseling and I had to sign all papers that he signed. My question is when something | more...

August 3, 2015

FHA Reverse Mortgages and the FHA Back To Work Progam

By Joe Wallace

A reader got in touch with us recently about the FHA’s Back To Work program, which was announced in 2013 as a way for lenders to offer FHA mortgage loans to people who have had financial hardship in the past that might otherwise disqualify them from a home loan. Back To Work requires the borrower and lender to work together to document the causes of a pre-foreclosure sale, foreclosure, bankruptcy or other financial hardship to show that the issue was circumstantial and not representative of a borrower’s actual credit worthiness. The following guidance to lenders is from FHA Mortgagee Letter 13-26: “As a result of the recent recession many borrowers who experienced unemployment or other severe reductions in income, were unable to make their monthly mortgage payments, and ultimately lost | more...

July 3, 2015

FHA Home Loans: Pre-Purchase Counseling, HECM Loan Counseling

By Joe Wallace

We often write posts that encourage borrowers to examine their pre-purchase counseling options before starting on the journey to apply for an FHA mortgage loan. We also write posts for eligible Home Equity Conversion Mortgage (HECM) loan applicants discussing HECM loan counseling. Some borrowers might wonder what the difference is between the two. There are some obvious differences. HECM loans are a type of refinancing loan for eligible borrowers aged 62 and older that requires no monthly payments and comes due when the borrower dies or sells the home. FHA single family home “purchase loans” are for borrowers looking to buy a home with an FHA guaranteed mortgage. So up front, many of the concerns a borrower has with a new purchase loan differ greatly than those for any refinance | more...