May 28, 2009
When you take out an FHA reverse mortgage or HECM, no payments are due until you sell the home. Did you know there are other situations that could make your loan come due? Here are four situations to be aware of that cause your FHA reverse mortgage to come due even if you haven’t sold your home.
FAILURE TO PAY FEDERAL DEBTS
The terms of your FHA reverse mortgage require timely payment of property taxes, hazard insurance, and any other financial obligations listed in the terms of your FHA reverse mortgage agreement. If you don’t pay, the lender has the right to call in your loan. Make sure you fully understand your financial responsibilities before you sign your FHA HECM loan paperwork, including technical details such as grace periods, what to do if you have financial problems, and how to file for more time to pay if needed.
CHANGING PRIMARY RESIDENCES
If the FHA reverse mortgage property stops being your primary residence, your FHA HECM loan comes due as per the terms of the loan contract. Do you know how long you can live in your summer home or RV before you risk the FHA reverse mortgage loan coming due? What does your bank consider a summer home? What’s considered a primary residence? Your loan paperwork spells this out in detail–don’t assume you’re safe, know the exact terms of your FHA HECM loan requirements before you sign. Every loan contract should be considered unique–don’t assume a friend or relative’s loan terms apply to your agreement with the bank.
A YEAR OR MORE AWAY
It’s easy to take out an FHA reverse mortgage with the assumption that you will remain in the property long-term, and obey the terms of your agreement to the letter. Sometimes our best intentions are thwarted by accidents and other unexpected events. What happens if you get sick or injured and need extended care? If you require a prolonged stay a nursing home or assisted living facility your FHA HECM loan could be in jeopardy. Ask your loan officer for advice on adding a second resident to your FHA reverse mortgage or make contingency plans for in-home care if it’s needed. You may be able to avoid your FHA reverse mortgage coming due simply by making extended care arrangements ahead of time, just in case. The rules for HECM loans state you can’t be away from the property for longer than 12 months.
PROPERTY IN DISREPAIR
FHA reverse mortgage agreements are clear–you must keep the home in good condition. This may be a simple matter while you are in residence, but what happens when you take an extended trip or spend a long vacation in a summer home? If the property falls into disrepair while you are gone, your FHA loan could become due. Remember to anticipate the unexpected while you are gone from storms or natural disasters to vandalism or other damage that could happen in your absence. Arrange for someone to look after your investment while you are away. Not only will you protect your FHA mortgage, but you’ll also have the peace of mind that comes from knowing your valuable property is being looked after while you are out.
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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