What Is A Reverse Mortgage? (Part 2)
A 12 Part Series
Part 2 - Reverse Mortgage Eligibility Requirements
To be eligible for a reverse mortgage, you must:
- be a homeowner 62 years of age or older. The youngest homeowner must also be 62 years old or older;
- own your home outright, or have a low mortgage balance that is no more than approximately 60% of the home's value and that can be paid off at closing with proceeds from the reverse mortgage;
- you must live in the home; and
- the home must be your primary residence.
You must also receive consumer information from an approved Home Equity Conversion Mortgage (HECM) counselor prior to applying for and obtaining a reverse mortgage. You can contact the Housing Counseling Clearinghouse toll-free at (800) 569-4287 for the name and telephone number of a HUD-approved counseling agency and a list of FHA-approved lenders near where you live.
Types of Homes Eligible for a Reverse Mortgage
Almost all home types are eligible. That includes single family homes, condominiums, 2-, 3- and 4-Unit homes where you live in one of the units, and mobile homes. In order for a mobile home to be eligible, it can not have been built before 1976, it must be on a permanent foundation, the land must be owned, and the home must pass an FHA inspection.
Determining Whether or Not There is Sufficient Equity in the Home
In determining whether or not there is sufficient equity in the home for a reverse mortgage, FHA takes into account the following in its calculation:
- Current interest rate
- Whether the interest rate will be fixed or adjustable
- Age of the youngest homeowner
- Location of the property
The following factors are not taken into consideration when determining your eligibility for a reverse mortgage:
- Income
- Credit history
- Discharged bankruptcy
- Health of the homeowners
You can use the online reverse mortgage calculator at AARP (http://rmc.ibisreverse.com//rmc_pages/rmc_aarp/aarp_index.aspx) to find out if you have sufficient equity in your home for a reverse mortgage, and to find what the maximum loan principal limit would be for your situation.
Next: Part 3 - Myths and Frequently Asked Questions of Reverse Mortgages
Part 1 - Definition of a Reverse Mortgage
If you're 62 or older and are looking for money to finance a home improvement, pay off your current mortgage, supplement your retirement income, to pay for healthcare expenses, or even to buy your retirement home, then consider getting a reverse mortgage. Find out how a reverse mortgage can use the equity in your home to pay you.
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