July 2, 2018
Should I consider an FHA reverse mortgage? Many qualified borrowers are asking that question now in light of recent housing market stats indicating rising property values well into 2019.
A Zillow.com report (through May 2018) indicates that housing is on an upward trend at the time of this writing. Home values have increased more than eight percent according to the Zillow report, and the same report says values could go up another 6.5% in the next year.
Rising home values in U.S. housing markets means that borrowers applying for appraisal-required refinancing or FHA Reverse Mortgages (also known as FHA HECM loans) may discover their home is worth more than they realized.
Naturally, this won’t apply in every single housing market, trends vary nationwide and your experience may vary based on a number of factors including the age and condition of the property, how it measures up to similar homes in your housing market, etc.
But an FHA Reverse Mortgage may be right for a qualified borrower aged 62 or older who either owns the home free and clear or is very close to doing so.
An FHA Reverse Mortgage is also known as a Home Equity Conversion Mortgage (HECM) and the loan is exactly what the name implies.
Borrowers who apply and are approved for FHA HECM loans / Reverse Mortgages don’t make monthly mortgage payments. Instead they are offered an amount of cash based on the appraised value of the home.
The payment size and options for payment depend on the nature of your loan and the agreement you work out with your participating lender. There are options for fixed rate FHA HECM loans and adjustable rate FHA HECM loans.
FHA Reverse Mortgages have occupancy requirements-the borrower(s) must be using the home as their main address and cannot leave the property unattended for long periods of time.
An FHA HECM counseling requirement is part of this type of mortgage loan-it’s intended to insure all parties to the loan fully understand their rights and responsibilities.
HECM loans become due in full when the borrower dies or stops using the home as the primary residence. You cannot be approved for a HECM loan or FHA Reverse Mortgage on a property that is not owned and occupied by the borrower.
Vacation homes, time shares, and other occasional-occupancy properties do not qualify, nor do investment properties.
Borrowers apply for FHA Reverse Mortgages in a manner similar to a new purchase or refinance loan; there is a credit check, appraisal, and the borrower should make sure to come to the home loan process with a full 12 months of on-time payments for all financial obligations for best results.
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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