In order to qualify for a reverse mortgage, a few things must be true, but they are all pretty straight forward. First, let’s review what a reverse mortgage is. The FHA has offered a program they call the Home Equity Conversion Mortgage which allows seniors to safely withdraw some of their home equity in their retirement years. Most people know this program as a ‘reverse mortgage’.
Some retirees have found this program to be extremely helpful in supplementing retirement funds from savings, Social Security and more. It is used to make needed home improvements, like modifications for mobility, for unexpected expenses like medical bills, or even to enjoy a multi-generational family vacation.
This loan type pays you, the homeowner, cash, tax free from the equity in your home. Special terms do apply in order to qualify for a reverse mortgage.
Qualify for a Reverse Mortgage with a Primary Residence
Do you plan on continuing to live in your home as your primary residence? Do you plan on this for at least 3 years?
These questions are important because if you answered ‘No’ to either, a reverse mortgage may not be a good fit for you. A requirement to determine if you qualify for a reverse mortgage is that you will continue to live in the home. If you plan on selling or moving out of the home within 3 years, other loan types might be a better solution. Speaking to a highly qualified and honest reverse mortgage advisor can help you sort through your options.
Qualify for a Reverse Mortgage by Being a Senior
Are you 62 years of age or older?
To be eligible for a FHA Home Equity Conversion Mortgage, you do need to be at least 62 years old. The program was specifically designed for seniors to assist during retirement. This financial tool has been a reliable and viable source of additional income since 1987 and it has to be limited to the senior population in order for it to be used as it was intended. Many efforts have been made over the years to create a safe and secure financial product for the older generation and therefore to qualify for a reverse mortgage, you must be at least 62 or older.
Qualify for a Reverse Mortgage by Having Equity in Your Home
Do you own your home outright? Do you have a low mortgage balance that can be paid off at closing? Are you downsizing?
You are able to use a reverse mortgage to purchase your primary residence if you are able to use your own non-borrowed money to cover the difference between the new home costs and the proceeds from the Reverse Mortgage. This is good for downsizing from a larger home into a smaller personal residence and you also want the reverse mortgage option. To qualify for a reverse mortgage, the first home needs to be paid off entirely.
If you plan on staying in your home, to qualify for a reverse mortgage, will need to either own it free and clear, or have some equity so that the reverse mortgage proceeds can pay it off. For example, if you owe $100,000 on your mortgage and qualify for a reverse mortgage in the amount of $200,000, the balance would be paid and you would no longer have a mortgage.
Qualify for a Reverse Mortgage by Having Adequate Income
Do you have the financial resources to continue to make property taxes, homeowners insurance and HOA fees? Are you able to maintain the home without financial hardship?
Although you won’t have a mortgage payment to make, you must be able to cover property taxes and homeowners insurance. Failure to do this, can result in default, therefore it is critical that you be able to cover these expenses without hardship. If you are not sure, talk to your reverse mortgage professional as there are options that can allow you to put aside the required funds. Overall, the reverse mortgage is designed to help you get additional income, and not create an inability to pay.
Qualify for a Reverse Mortgage with the Right Home
Does your home meet the eligibility requirements?
Whether or not your current home was purchased with an FHA-insured mortgage, you can qualify for a reverse mortgage as long as the home you own is not a co-op and meets the following guidelines:
- . Is a condominium, townhome, or a single family home occupied by you.
- . Is a 2-4 multi-unit property in which you live in one of the units.
If you qualify for a reverse mortgage, you can have another option to meeting your retirement goals. Some of the questions can bring up some complicated topics. If you have made it through all the questions and feel that you could qualify for a reverse mortgage or have additional questions, please contact Kevin Guttman.
He is happy to answer any questions you may have and help you make the right decision for your unique situation.