January 6, 2011
FHA reverse mortgages, also known as a Home Equity Conversion Mortgage, are a way for qualified borrowers to take out a home loan against the equity built up in them without having to worry about monthly mortgage payments.
The FHA reverse mortgage program requirements are set up for a specific group of eligible borrowers. There are age-specific rules, regulations about the types of eligible properties, and residency issues connected with HECM loans all applicants should know about before applying.
Do you know if you qualify? Here are the basic facts about FHA-insured Reverse Mortgages or HECM loans:
Age Requirement
FHA reverse mortgages or HECM loans are only for those aged 62 or older.
FHA Residency Requirements
As with other FHA loans for single-family homes, FHA rules for HECM loans state the borrower must own and occupy the property. Summer homes are not eligible, and FHA guidelines state the mortgage amount may become due when the borrower fails to maintain the property as a primary residence after a certain length of time.
Eligible Properties
According to the FHA, HECM loans may be issued for any property that is a single family home, condominium unit, manufactured home, or a multi-family residential unit as long as the borrower is living in one of the units as the primary residence.
The FHA also allows reverse mortgages on newly constructed residences, but only when, “…a certificate of occupancy (or equivalent) has been issued for the new home by the local authority, the new home is 100% complete, and the owner is occupying the new home.”
Other Rules
The FHA says qualified applicants age 62 or older “should have either no mortgage or one small enough to be paid off with the proceeds of the HECM loan. Life estates and living trusts may also qualify.” FHA requirements for HECM loans include mandatory counseling from a HUD-approved agency.
FHA insured HECM loans offer the buyer either a line of credit, monthly payments, or some combination of the two depending on the borrower’s choices. HECM loans also permit the borrower to refinance the loan to take advantage of additional equity built up in the home over time after the closing of the original reverse mortgage.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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