Who can apply for a reverse mortgage loan?

Taking out a reverse mortgage is surely a great option to lead a comfortable retired life. There are many lenders who offer reverse mortgages and some of these even try and contact potential borrowers directly by purchasing their details via reverse mortgage leads. However, you need to understand that not everyone can take out a reverse mortgage on their homes. There are certain requirements you have to fulfill if you want to be eligible to take out a reverse mortgage loan:

Minimum age requirement of 62 years

The borrower of a reverse mortgage loan must be at least 62 years of age. In case you are living with your spouse, a partner or a sibling, you can include that person as a co-borrower, provider he/she is at least 62 years of age. The best part here is that your co-borrower can live in the home, in case you need to move out to a nursing home or an assisted living facility. He/she doesn’t have to worry about repaying the mortgage. Co-borrowers generally have the same rights when it comes to reverse mortgage.

Available only for primary residences

The criterion behind HECM is that you have to live in the house on which you take out a reverse mortgage. If the home is left vacant for a period of 12 consecutive months, your reverse mortgage becomes due for payment. However, if you are splitting your town between your summer and winter homes, you can still take out a reverse mortgage provided you don’t spend too much time in your second home. If you have bought a second home as an investment property that shouldn’t affect the reverse mortgage that you have taken out on your primary residence.

The balance on your traditional mortgage, if any, needs to be low

You should ideally own your home outright if you want to take out a reverse mortgage on it. However, if you still have a traditional mortgage, the balance that you owe needs to be low enough so that it can be paid off at the closing, with the proceeds of the reverse mortgage loan. In case you owe more than that you may not qualify for reverse mortgage.

Adequate resources to pay taxes, insurance and property charges

Not paying your property taxes, home insurance premiums or maintenance charges can trigger a reverse mortgage to come up for repayment. Therefore, you need to prove that you have adequate financial resources to pay for these expenses, when you apply for a reverse mortgage.

Well-maintained home

As per the FHA requirements, the home on which a reverse mortgage is taken, should be in good condition. If not you may have to make some repairs before applying for your loan.

Most reverse mortgages today are insured by the Federal Housing Administration (FHA) through its Home Equity Conversion Mortgage (HECM) program. This program requires that you meet with a reverse mortgage counselor to discuss how a reverse mortgage works and how much it will cost you. The counselor must be approved by the Department of Housing and Urban Development (HUD). FHA also requires that your home be in good shape. If your home is poorly maintained, you may need to repair it before you can get a HECM reverse mortgage. An appraisal is mandatory to get the approval of a reverse mortgage loan application.  This appraisal will determine the actual value of your property.

The appraiser in this case, is chosen neither by you nor your reverse mortgage provider. He/she is chosen by the Appraisal Management Company. Such a person will be a licensed appraiser of your state and will be familiar with the property prices in your area.

The appraisal involves three basic stages: inspection, comparison and final appraisal. At the inspection stage, the licensed appraiser will visit your home and inspect it thoroughly to determine the accurate market value. This will be followed by a research of similar properties in your area. Recent sales of properties in your area will be considered in order to determine the exact market value of your home. Based on these findings, the appraiser will give you a final appraisal report, which becomes the basis for the reverse mortgage.

Being aware of all these requirements will help you in taking an informed decision on reverse mortgage, before you say ‘Yes’ to a lender who contacts you via reverse mortgage leads.

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