FHA Reverse Mortgage Guidelines

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Since 1934, The Federal Housing Administration (FHA) has been providing homeowners with insurance on home loans. A FHA reverse mortgage is a type of loan designed for homeowners who are 62 and older. This type of a loan is also known as a Home Equity Conversion Mortgage (HECM). Below are some of the FHA reverse mortgage guidelines required to receive a FHA-insured reverse mortgage.

 

● Borrower(s) must own the property and use it as a primary residence.

● You need to have an accurate appraisal of the property, since the loan will be based on the home’s value, or the maximum FHA payout–which ever one is lower.

● Home owners are required to receive education and counseling before a HECM loan is approved.

● The youngest borrower must be at least 62 years of age.

 

You may not realize that there are multiple types of FHA loans. The FHA is a branch of the U.S. Department of Housing and Urban Development (HUD), and offers a wide range of loans for different groups of people. These loans serve a variety of purposes. Below are some of the most common ones.

Fixed Rate

Fixed rate mortgages are the most popular type of FHA loan today. As the name implies, the rate for this type of mortgage will stay fixed, and not change over the duration of the loan. This can be beneficial for borrowers because they will always know exactly what their payment will be each month.

FHA Adjustable Rate

The adjustable rate mortgage (ARM) has an interest rate and monthly payment that may fluctuate. Most of the time people choose this type of loan over a fixed rate because they can get lower payments.

 

The majority of adjustable rate mortgages have a fixed rate initially, which can change regularly over the duration of the loan. These changes can happen annually or even twice per year.

 

Adjustable rate mortgages can empower home buyers to buy more expensive homes with a low interest rate, initially. Remember though, the interest rates and monthly payments may increase after the initial fixed rate ends. Despite this, these types of loans may be attractive to buyers who move often, every few years or so.

FHA Reverse Mortgage

The reverse mortgage provided by the FHA is also known as a Home Equity Conversion Mortgage (HECM). It is only available to those 62 and older who have equity built up in their homes. As we mentioned, the borrower must also reside in the home as their primary residence.

 

Home Equity Conversion Mortgages can help seniors supplement their income by turning their equity into cash. Almost all reverse mortgages will require that your home is in good shape, and all your property taxes and insurance payments are up to date. There is no payment due until the home is sold or the borrower passes away.

 

Funds are dispersed in the following ways:

 

● A line of credit with a cap on the amount of money you take out.

● Equal monthly payments for the rest of your life.

● Equal monthly payments for a fixed period of time.

Final Word

While there are many different types of FHA loans available, the Home Equity Conversion Mortgage is a very attractive prospect for seniors looking not to liquidate their assets but obtain cash from their home. It can be confusing navigating through the sea of FHA loans and requirements, let us help. If you are interested in learning more about FHA reverse mortgage loans, or have any other questions, contact us today.


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