How Do You Qualify for a Reverse Mortgage?
Read on to find out “How do you qualify for a reverse mortgage?” Qualifying for a Reverse Mortgage is relatively straightforward. The requirements are clearly specified by the U.S. Department of Housing and Urban Development.
Reverse Mortgages are an increasingly popular loan type for older adults. The loan enables the borrower to eliminate monthly mortgage payments, access cash (if there is sufficient home equity) and continue to own and live in the home.
To be eligible for a Reverse Mortgage, you must meet the three main requirements:
1. How Do You Qualify for a Reverse Mortgage: Age Requirements
At least one of the titleholders on the home must be 62 years of age or older. If you are married – both you and your spouse should probably be titleholders in order to protect your rights as homeowners.
2. Equity Requirements
To qualify for a reverse mortgage, your property must have sufficient equity remaining in it to eliminate any existing mortgages or liens using the reverse mortgage. In practice, this means you generally must have at least 50% equity in the home in order to qualify, though the precise limit depends on your age and current interest rates.
Your home equity can be calculated by taking the value of your home and subtracting the amount you owe on your mortgage and any other liens on the home.
3. Property Type Requirements
The home must be of a type approved by the FHA for Reverse Mortgages.
Property eligibility can be complex. Reverse Mortgages are currently not available on co-ops, for example. Bed & breakfasts and working farms are also ineligible, as are manufactured homes built before 1976. The borrower must own the land the home is built on, the home must be on a permanent foundation, and the home must pass an FHA inspection.
As there are many quirks in determining property eligibility, it is best to speak with a loan officer before embarking on the process to make sure that your home is eligible.
These eligibility requirements are set by the Federal Housing Administration who operates and insures the Reverse Mortgage program.
The above criteria are the primary considerations for how do you qualify for a reverse mortgage.
However to be eligible you must also:
- Have the financial resources to continue to pay for ongoing property charges like property taxes, insurance, homeowner association fees, etc…
- Not be delinquent on any federal debt.
- Participate in a financial counseling session with a HUD approved reverse mortgage counselor. (Most borrowers find these sessions to be very useful.)
For more information, you might wish to use a reverse mortgage calculator to estimate your loan amount and access additional resources.