News, updates, and explanations to keep you informed.
FHA Reverse Mortgages: Getting Your Loan and Paying It Back
FHA reverse mortgages let qualified homeowners borrow money against a percentage of the equity in a home that is either paid off or almost completely paid for. This kind of equity conversion loan is guaranteed by the FHA. FHA reverse mortgage or HECM loan borrowers aren't required to make any payments on their loan unless they sell or stop using the home as their main residence. When the home is sold, the FHA reverse mortgage is paid off out of the proceeds of the sale. That covers paying back the loan, but what about the amount of the loan itself?
DO I GET TO BORROW AGAINST THE ENTIRE AMOUNT OF MY HOME'S EQUITY?
The amount of your loan depends on The appraised value of your home
current interest rates, your age, and the information on your credit report.
The minimum age for FHA reverse mortgage applicants is 62; older borrowers will be approved for larger FHA reverse mortgage loans than younger borrowers. But even a younger application may qualify to borrow against a respectable amount of the home's equity. The bottom line is simple--the more valuable your home is, the more money you may be approved to borrow.
DOES MY CREDIT FACTOR IN?
It's easy to get confused on the credit requirements for an FHA reverse mortgage. As with any loan, one factor that determines your eligibility for an FHA reverse mortgage is your credit report. While your specific credit score is not used to approve or deny your application, but if your credit report shows outstanding delinquent debts to federal agencies, you will not be approved. FHA rules clearly state applicants must not be delinquent on federal debts; approval is granted only to those who are current on payments such as federal income tax or other indebtedness to the government.
HOW DO I GET PAID?
FHA reverse mortgage borrowers have a variety of options to get their money. The options include tenure, which provides equal monthly payments for the lifetime of the loan. You may also choose a Term option, where you get equal monthly payments for a specific number of months.
Modified Tenure is a line of credit option combined with monthly payments, and a Modified Term plan is a line of credit plus monthly payments for a specific number of months. You can also choose for a simple Line of Credit option, allowing you to take money in "unscheduled installments" much like a checking or credit card account. Some lenders may be willing to alter your option later, but you may be charged a fee. Ask before you decide about the ability to change payment schedules or types.
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