Reverse Mortgage Eligibility

Reverse Mortgage Eligibility

Basic Reverse Mortgage Eligibility Requirements

Are you eligible for a reverse mortgage? Like with any loan type, HUD HECM Reverse Mortgages come with their own unique eligibility requirements, including:

  • You must be at least 62-years-old
  • You must occupy the home as your primary residence

Reverse Mortgage Qualifications

Occupancy Types

Under HUD reverse mortgage guidelines, if you do not reside in your home and use it as your primary residence, you are not allowed to take a reverse mortgage out on that home. If you already have a reverse mortgage on the property, you will need to have your reverse mortgage payments continue in the event you move out. In addition, under reverse mortgages, you are required to keep the property in good condition throughout the time that you receive payments. 

In the event that you must leave the property to live with a family member, in a nursing home, or otherwise change to a new place of residence, your reverse mortgage loan’s term will end and instantly require you to begin paying off the reverse mortgage.

To see if you qualify for a reverse mortgage, fill out our quick 1-minute form to have a Mortgage Advisor contact you. 

Property Types

According to guidelines, your property must fall into one of the following categories in order to qualify for a reverse mortgage loan:

  • Condominium (HUD-approved and owned outright by the borrower)
  • Manufactured home (built after June 1976 and affixed to FHA-approved land)
  • Townhome (owned outright by the borrower)
  • Single-family home
  • Multi-unit property (up to 4 units)

Regardless of the property, it must be your primary residence to be eligible for a reverse mortgage. In other words, rental homes, vacation homes, and other commercial properties cannot be considered eligible for reverse mortgage loans. The one exception to this rule is a rental home is a multi-unit home, with two to four units, and the owner resides in one of those units. 

Loan Limits

While FHA loans are currently limited to $625,500, different criteria are taken into consideration to calculate how much you will receive under reverse mortgages, including:

  • Your age
  • The current appraised value of the property
  • The current interest rate on your mortgage

Credit History

Credit history seems to be less important when it comes to reverse mortgages, but there are a few credit-related items that lenders still take into account, including: 

  • Your existing mortgage must be up-to-date in payments
  • Your payment history must contain no late payments in the last two years
  • A  bankruptcy within the past two years could seriously jeopardize your ability to get a reverse mortgage loan
  • Applications who have experienced a foreclosure may be considered but they will usually have to wait up to three years before applying

If you are seeking a reverse mortgage, meeting with a reverse mortgage counselor from an HUD-approved agency can help determine if you qualify and if there might be other alternatives that might suit your needs better. 

Loan-To-Value (LTV)

The typical loan-to-value ratios used by conventional lenders do not play a part in determining if a borrower qualifies for a reverse mortgage. Rather, the Total Annual Loan Cost (TALC), which projects the annual average cost of the loan under different scenarios, becomes the most critical metric in helping the applicant decide if a reverse mortgage is right for them. Then the TALC and the age of the borrower are used to figure out how much money will be loaned to the borrower and how it will be paid out. Here are some basic rules of thumb for how this works:

  • The older the youngest applicant is, the more money you receive.
  • The greater the appraised value of the home, the more cash you’re eligible for.
  • The higher the reverse mortgage interest rate, the lower your cash payout.

To determine just how much you may be eligible for on a reverse mortgage loan, consider using one of the many reverse mortgage calculators available online. The best way, however, to figure out if a reverse mortgage will work for you is to schedule a meeting with an independent, HUD-approved counselor. 

To see if you qualify for a reverse mortgage, fill out our quick 1-minute form to have a Mortgage Advisor contact you. 

Required Documents

Before you can start the underwriting process on a reverse mortgage, you’ll need to make sure you have certain documents on hand, including:

  • A certificate of completion from an HECM counselor
  • A state-issued photo ID (driver's license, passport, etc.)
  • Medicare card or social security card 
  • Policy for homeowners insurance
  • Latest statement for your equity/mortgage loan 
  • Certificate of Death for spouse (if deceased spouse is on deed)
  • Certificate of marriage/birth 
  • Property tax bill 
  • Power of attorney

Age

Reverse mortgage eligibility requirements stipulate that borrowers must be 62 years of age or older since these loans are designed to reduce the financial stress on Americans nearing or in retirement by accessing the value locked up in their home equity. 

Age also plays a critical factor in deciding how much money the borrower will be eligible to receive, with older borrowers being qualified to borrow more against their home’s value.

Meeting With a Reverse Mortgage Counselor

Meeting with an HUD-approved reverse mortgage counselor is not just a good idea; it is a requirement to apply for a reverse mortgage. All reverse mortgage applicants must first participate in a meeting, either over the phone or in person, with an HECM Reverse Mortgage counselor before they can start the application process. This counseling session makes sure that you have all the information on hand that you need to make a sound borrowing decision, such as the requirements expected of you, the different ways in which you can receive your payments, when repayment must begin, etc. Many reverse mortgage borrowers, for instance, are unaware that moving in with a family member or moving into a nursing home will cut off their reverse mortgage payments instantly—a good thing to know before you go through all of the work of applying.

At the conclusion of this meeting, the counselor will give you a certificate of completion to submit to the lender and start the application process.

To see if you qualify for a reverse mortgage, fill out our quick 1-minute form to have a Mortgage Advisor contact you.