Reverse Mortgage: Who is Eligible?
In my last article on Reverse Mortgages (Home Equity Conversion Mortgage – HECM) I provided you with some elementary background knowledge of the progression of Reverse Mortgages going back to 1961 and through Ronald Reagan a safer and more universally acceptable product was created. The last major overhaul came through George W. Bushes Home Economic Recovery Act of 2008, making for a safe loan to enhance the lifestyle of the aging homebuyer.
While the Reverse Mortgage has traditionally been a refinance loan that either pays the homeowner every month for the rest of their life, or provides a lump sum cash-out payment or simply pays off the current mortgage eliminating any principal or interest payment for so long as the last remaining borrower survives.
- v Both Borrowers MUST be 62. If one borrower is less than 62, the senior borrower MAY obtain the loan on their own – but this is not recommended. If the younger borrower survives the older and is not on the loan, then the loan will become due; and
- v The home must either be owned outright or at least a minimum amount of equity must be present. HUD uses a sliding scale based on the age of youngest borrower; and
- v The home must be the borrowers primary residence; and
- v The borrowers cannot be delinquent in any federal debt (back taxes or foreclosing/short selling/filing bankruptcy on a government insured loan in the last 3 years); and
- v The borrowers must successfully participate is a consumer information session with a HUD approved HECM counselor and obtain a signed Counseling Certificate.
- v The borrower must be able to prove that they can maintain the cost of ownership; i.e. HOA dues, taxes, insurance, maintenance, etc; and
- v Have sufficient cash to pay their own closing costs – seller contributions are not allowed; and
- v Have sufficient cash for the down-payment. Seller contributions or other loans are not allowed. Gifts are allowed from family or other interested parties (church, non-profit, etc.). Down-Payment Assistance programs or Agent contributions are not allowed.
- v The actual ‘Down-Payment’ is determined by a calculation that is based on the age of the youngest borrower, the current expected rate and the maximum amount or value (the lower of the actual sales price, appraised value of FHA Maximum claim amount (currently $625,000 or $417,000 loan).
- v Single Family homes (SFR) and 2-4 unit homes are eligible, so long as the Senior Borrower lives in one of the units as their primary residence; and
- v Condos and Townhomes are eligible so long as they meet the current FHA requirements; and
- v Manufactured (Mobile) homes are eligible if they meet the current FHA requirements.
Senior Borrower Required Documents
- v Original Signed and Dated Counseling Certificate
- v Copy of both borrowers Social Security Card (or Medicare Card); and
- v Acceptable Photo ID (Driver’s License, Identification Card, Passport, etc.); and
- v Proof of Age (Birth Certificate, Driver’s License, Passport, etc.); and
- v Complete copy of Notarized Living Trust Agreement if the property will be held in a living trust; and Homeowners Insurance Policy (and flood insurance if required).
Senior Reverse Mortgage Examples
I asked Tamera Field (877.632.7890)of Security 1 Lending to proof both of my articles, since she is the expert in Reverse Mortgages and can provide them to a Senior Borrower who meets the above requirements. She let me know she has her own blog with real life examples of some of the Seniors she has helped over the years with a HECM mortgage. Please take a few minutes and explore her blog...not a lot there - but what is there is so valuable.
Until next time, when I explore more aspects of Reverse Mortgages.