Reverse Mortgage Eligibility
To be eligible for a reverse mortgage, the youngest homeowner on the mortgage must be at least 62 years old and have enough home equity built up. In addition, the borrower’s home must be the homeowner’s primary residence.
The Federal Housing Administration (FHA) determines if there is enough home equity by calculating:
- Current interest rate
- Variable or fixed rate
- Youngest homeowner’s age
- FHA lending limits
- Value of the home when appraised
Use the reverse mortgage calculator located at the top right of this page to determine whether you have enough equity and to determine the principal loan limit.
Typically, reverse mortgage eligibility is NOT affected by:
- Bankruptcy that has been discharged
- Homeowner health
- Homeowner income or credit
What types of property are eligible for a Reverse Mortgage?
- Single family homes
- Two to four unit homes
- Manufactured homes built after 1976
- HUD-approved condominiums
Note: All property types must meet FHA requirements.
Frequently Asked Questions about reverse mortgages
Is it possible to qualify if I have a mortgage?
Yes. Many people who receive a reverse mortgage loan use the money to pay off their mortgage. However, there must be enough equity for the homeowner to qualify.
I am not 62 but I am permanently disabled. Do I qualify?
No. Reverse mortgage eligibility is determined by the FHA and the criteria includes age. The FHA does not make exceptions for disability or Social Security status.
Does every 62-year-old homeowner qualify for a reverse mortgage?
No. Not every 62-year-old homeowner has enough equity built up in their home. In order to qualify, younger homeowners are required to have more equity. Finally, certain homes are not eligible for a reverse mortgage.
What if there is not enough home equity?
“Shortfall” is the term used to describe the situation where a reverse mortgage does not generate enough money to repay an existing mortgage. If this happens, it is possible for a homeowner to pay the remaining balance on their mortgage in order to qualify for the reverse mortgage. Typically, homeowners seeking a reverse mortgage who experience shortfall do not have the resources to make up this difference.
Is it possible to use a reverse mortgage for purchase?
Yes. The FHA Reverse Mortgage purchase product enables seniors to purchase a residence with the money generated by a reverse mortgage. This program was designed to help eligible homeowners buy a home suited to their needs without accumulating new mortgage payments. However, a down payment on the new home is required.
How many homeowners can be on the loan?
The FHA allows up the three homeowners to be on the loan. All homeowners must be 62 or older and at least one must occupy the home as a primary residence. Homeowners may be removed or added to a title. Relationship has no bearing on a reverse mortgage or the ability to be listed on a title.
What if I didn’t buy my house with FHA mortgage insurance?
You can still qualify for a reverse mortgage even if you did not purchase your home with FHA mortgage insurance; however, the property must meet FHA standards to qualify.
What kinds of homes are eligible?
There are multiple types of homes that meet reverse mortgage guidelines. Besides a single family residence, FHA-approved condominiums are eligible, as are owner-occupied 1-4 unit dwellings, and FHA-approved manufactured homes.
How do reverse mortgages differ from bank home equity loans?
Home equity loans require you to have sufficient income in order to qualify, as borrowers must make monthly mortgage payments.
In contrast, a reverse mortgage provides you with income and does not have any income qualification requirements. No mortgage payments are required throughout the duration of the loan, and the loan does not become due until it is no longer your principal residence. However, you must still pay real estate taxes, utilities and insurance costs. Because the HUD reverse mortgage is insured by the FHA, you can never be evicted from your home because you miss a payment.
How will the loan money be disbursed to me?
There are five possible payment plans:
- Tenure – The borrower will receive fixed monthly payments for the duration of his/her life, or until they no longer occupy the property as a principal residence.
- Term – Fixed monthly payments are disbursed for a set amount of time. Line of Credit – Installments are delivered when and in an amount of your choosing until the line of credit becomes exhausted
- Modified Tenure – Both fixed monthly payments and a line of credit are available for the duration of the time you remain in the home.
- Modified Term – Fixed monthly payments and a line of credit are disbursed for a set amount of time of the borrower’s choosing.
Is it possible for my home to be taken away if I outlive the loan?
No. The FHA certifies that you will receive all of the payments that are owned to you without risk of losing your home. You cannot outlive a reverse mortgage, and no debt will be passed on to your heirs or the estate. If the balance of the loan were to exceed the value of the property, you will not be forced to sell or vacate your home.
Will I still have an estate to pass on to my heirs?
As mentioned, once a home is sold or ceases to be used as a primary residence, the loan becomes due. All proceeds from the sale, beyond what is owed on the loan, are passed to you or your heirs and estate. Other assets are not affected by the reverse mortgage, nor can any debt be passed to your heirs. Moreover, you or your heirs will continue to maintain the title to your home until it is sold.
How much money is it possible for me to get from a reverse mortgage?
The amount of money available to you in a FHA-insured Home Equity Conversion Mortgage is determined by your age, current interest rate, the appraisal value of your property or the HECM FHA mortgage loan limit of 625,000 or the sales price (whichever is least), and the initial Mortgage Insurance Premium. To learn more, discuss this formula with your lender and an HUD-approved counselor.
Do I need to hire an estate planner to help me find a reverse mortgage? I have already been contacted by a company that claims they will help me find a lender for a small percentage of my loan.
Typically, estate planning services are an unnecessary expense. HUD makes all of this information available at little or no cost and also offers counseling services. Contact your local HUD-approved housing counseling agency for more information.
- The borrower will receive fixed monthly payments for the duration of his/her life, or until they no longer occupy the property as a principal residence.
- Fixed monthly payments are disbursed for a set amount of time.
- Installments are delivered when and in an amount of your choosing until the line of credit becomes exhausted
- Both fixed monthly payments and a line of credit are available for the duration of the time you remain in the home.
More Questions? Contact us.