Getting the right reverse mortgage information is an essential step in knowing if the program is right for you. The Federal Housing Administration was created as part of the Department of Housing and Urban Development to help potential homeowners get the financing they need to become homeowners. Since its creation 60 years ago, the number of homeowners in the nation has risen to approximately 68 percent. While the administration does offer mortgage insurance for existing conventional loans, they also oversea different financing programs to help seniors and existing homeowners throughout the nation. The Home Equity Conversion Mortgage, also referred to as HECM, is a reverse mortgage program that gives existing homeowners access to the equity in their homes. If you are looking for reverse mortgage information, review the HUD qualifications for the HECM program and see if you qualify. This FHA reverse mortgage program is overseen by a government agency and provides economic stimulation to the country. See why you should choose a government-sponsored program and make a wise choice when you are looking for a fair reverse mortgage.
How Does the HECM Program Work?
The HECM program enables homeowners to withdraw equity out of their home in fixed monthly payments or a line of credit. The program can also be used to purchase a primary residence if you have the money available to pay the difference between the proceeds of the program and the sales price of the home. When you are researching reverse mortgage information, you should understand eligibility requirements and alternatives so you can make the best long-term move. The program offers HECM counselors so you can make an informed decision regardless of what you choose. It is important to sit down with an unbiased HECM counselor to complete counseling before you choose a reverse mortgage or the alternatives.
What Are Borrow Requirements for FHA’s HECM Program?
When you withdrawal equity out of your home you are still borrowing. This is why the FHA is strict with their qualification guidelines when they consider reverse mortgage applications for the program. There are very basic eligibility requirements and then more complex requirements that a FHA-approved lender can explain to you during the process of filling out your reverse mortgage application. You should review the basic requirements first and move on to contacting an approved lender if you still qualify.
Reverse Mortgage Information – Basic Eligibility Requirements:
* All borrowers must be at least 62 years of age at the time of application.
* All applicants must own their primary residence or have a very small mortgage balance remaining.
* Borrowers must occupy the property as a primary residence and not a vacation home.
* Borrowers may not be delinquent on any federal debt including taxes.
* Borrowers must participate in an HECM counseling session that is approved by the FHA.
* The home must be a single family home or a building with 4 units or less where the owner occupies one unit.
* The building may be a HUD-approved condo.
* Some manufactured homes qualify if they meet FHA requirements.
Mortgage Amount Requirements
There are also requirements based on the mortgage amount of the loan. A mortgage amount will be based on the following:
* The current age of the youngest borrower on the loan.
* The current interest rate.
* The lowest price between the appraisal, the FHA mortgage limit, or the sales price of the property.
* Your choice between the HECM Standard or the SAVER Initial Mortgage Insurance Premium.
Financial Requirements
If you meet the borrower’s eligibility requirements you should review the financial stipulations as well:
* The HECM has no income qualification and the borrower does not need to prove employment.
* If obligations of the mortgage are met there are no repayment requirements.
* Closing costs of the mortgage can be financed and can exceed FHA limits.
What Type of Terms Can You Choose From?
When you are reviewing reverse mortgage information you will find that no program is cut and dry. The FHA offers 5 different payment plans for borrowers that qualify for the HECM program. These programs include:
* Line of Credit- payments are not fixed and you can withdraw the amount you need when you need it.
* Term- equal fixed payments for a specified amount of time.
* Tenure- equal payments for as long as one of the borrowers lives.
* Modified Tenure- fixed monthly payments for as long as a borrower lives with the option for a line of credit.
* Modified Term- Fixed monthly payments for a specified amount of time plus the option for an open line of credit.
When you choose a payment option during the reverse mortgage application process you do have the option to change the payment plan for a fee. The amount you can borrow and the amount of your payments will depend on your age at the time of the mortgage and the type of payment plan you choose. You will appreciate lower interest rates if your home is more valuable or you are older at the time of the loan. You should sit down with an HECM counselor and discuss the regular payments of each payment option before you make a choice.
The Costs of an HECM Reverse Mortgage
When you are reviewing different reverse mortgage information you will find that the costs for a reverse mortgage can vary based on the lender. This is why most seniors choose to finance their mortgage through an FHA-approved lender. When you take out the loan, you can finance the costs of the loan in the loan or pay for the costs out-of-pocket. Fees include: origination fee, mortgage premium insurance, interest charged on the loan, servicing fees for the loan, and closing costs. The FHA sets limits for origination fees, servicing fees, mortgage premium insurance and interest. Closing cost fees are charged from the third party lender.
Always consider all of your options when you are reviewing reverse mortgage information. If you complete HECM counseling and you decide the FHA program is right for you, meet with an FHA-approved lender to start the process of withdrawing equity from your home.