Personal Requirements

All borrowers on the home’s title must be at least 62 years old. The older you are, the more funds you can receive from a Home Equity Conversion Mortgage (HECM) reverse mortgage. You must live in your home as your primary residence for the life of the reverse mortgage. Vacation homes or rental properties are not eligible. You must own your home outright or have at least 50% equity in your home. Even if you owe some money on your existing mortgage, you may be eligible for a reverse mortgage. The funds from the reverse mortgage would first pay off your mortgage and satisfy any other eligible existing liens before you could use the funds for other things. Refinancing existing debt(s) with a reverse mortgage can help improve monthly cash flow. You must meet with an approved reverse mortgage counselor. The reverse mortgage counselor will discuss how a reverse mortgage works and the associated costs. The goal of the counseling session is to make sure that potential borrowers fully understand and are comfortable with the process and the loan terms.

HECM PROPERTY REQUIREMENTS

- Single-family homes, or 2-to-4 unit properties with one unit occupied by you

- Manufactured homes (built after June 1976) that meet HUD requirements

- Condominiums that are FHA-approved* - Townhouses

FINANCIAL REQUIREMENTS

You must show the financial ability and willingness to meet your loan obligations, which include paying property-related taxes and insurance, and keeping up with regular home maintenance and repairs.

What is a Reverse Mortgage?

A reverse mortgage is a financial tool that allows you to turn some of the equity in your home into funds you can use as you choose. Like a traditional mortgage, a reverse mortgage is a home-secured loan; but unlike a traditional mortgage it is specifically designed for homeowners age 62 and older. The process to obtain a reverse mortgage is simple; but it’s helpful to know what you can expect. Here are a few steps that you will need to take.

Step 1: Education and Preparation

Every Reverse Mortgage will start with educating yourself. You may have heard a lot from friends and family or even from television about what reverse mortgages are, but it's important to weigh all the pros and cons for yourself. An experienced loan specialist can provide you with the information you need to help you decide if a reverse mortgage solution is the right choice for you.

Step 2: Application and Counseling

When you decide to move forward, you'll choose a lender and submit your application to them. The application includes some personal information, and a financial assessment will be conducted to make sure you'll be able to afford ongoing expenses like property taxes, insurance and home maintenance. You'll meet with an independent reverse mortgage counselor who's approved by the U.S. Department of Housing and Urban Development (HUD)*, to make sure you understand all aspects of the loan.

Step 3: Loan Process & Underwriting

Your home will be appraised by an independent appraiser, to determine the value. Then the appraisal and loan package will be sent to an underwriter for review and approval. The underwriter will make sure all the information in the package is correct, complete, and compliant with all applicable laws and regulations.

Step 4: Almost There

After your loan application is approved, you will sign your closing documents with a title officer or attorney (depending on your state's requirements).

Step 5: Finish Line

Three days after closing, the loan funds are disbursed and you can access them according to the payment plan you selected. Your loan funds will first be used to pay off any existing mortgage on your home, a new lien (the reverse mortgage) is placed on the home, and you can use the remaining funds from your reverse mortgage however you choose.

HOME EQUITY CONVERSION MORTGAGES FOR SENIORS

(H.E.C.M)

There are many factors to consider before deciding whether a HECM is right for you. To aid in this process, you must meet with a HECM counselor to discuss program eligibility requirements, financial implications and alternatives to obtaining a HECM and repaying the loan. Counselors will also discuss provisions for the mortgage becoming due and payable. Upon the completion of HECM counseling, you should be able to make an independent, informed decision of whether this product will meet your specific needs.

There are borrower and property eligibility requirements that must be met. You can use the listing below to see if you qualify. If you meet the eligibility criteria, you can complete a reverse mortgage application by contacting a FHA-approved lender. You can search online for a FHA-approved lender or you can ask the HECM counselor to provide you with a listing. The lender will discuss other requirements of the HECM program, such as first year payment limitations, available payment options, the loan approval process, and repayment terms.

Borrower Requirements

You must:

Be 62 years of age or older

Own the property outright or paid-down a considerable amount

Occupy the property as your principal residence

Not be delinquent on any federal debt

Have financial resources to continue to make timely payment of ongoing property charges such as property taxes, insurance and Homeowner Association fees, etc.

Participate in a consumer information session given by a HUD- approved HECM counselor Property Requirements

The following eligible property types must meet all FHA property standards and flood requirements:

- Single family home or 2-4 unit home with one unit occupied by the borrower

- HUD-approved condominium project

- Manufactured home that meets FHA requirements

Financial Requirements

Income, assets, monthly living expenses, and credit history will be verified. Timely paymentf real estate taxes, hazard and flood insurance premiums will be verified For adjustable interest rate mortgages, you can select one of the following payment plans:

Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.

Term - equal monthly payments for a fixed period of months selected.

Line of Credit - unscheduled payments or in installments, at times and in an amount of your choosing until the line of credit is exhausted.

Modified Tenure - combination of line of credit and scheduled monthly payments for as long as you remain in the home.

Modified Term - combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.

For fixed interest rate mortgages, you will receive the Single Disbursement Lump Sum payment plan.

Mortgage Amount Based On

The amount you may borrow will depend on:

Age of the youngest borrower or eligible non-borrowing spouse

Current interest rate; and

Lesser of:

appraised value;

the HECM FHA mortgage limit of $765,600; or

the sales price (only applicable to HECM for Purchase)

If there is more than one borrower and no eligible non-borrowing spouse, the age of the youngest borrower is used to determine the amount you can borrow.

HECM Costs

You can pay for most of the costs of a HECM by financing them and having them paid from the proceeds of the loan. Financing the costs means that you do not have to pay for them out of your pocket. On the other hand, financing the costs reduces the net loan amount available to you.

The HECM loan includes several fees and charges, which includes: 1) mortgage insurance premiums (initial and annual) 2) third party charges 3) origination fee 4) interest and 5) servicing fees. The lender will discuss which fees and charges are mandatory.

You will be charged an initial mortgage insurance premium (MIP) at closing. The initial MIP will be 2%. Over the life of the loan, you will be charged an annual MIP that equals 0.5% of the outstanding mortgage balance.

1. Mortgage Insurance Premium You will incur a cost for FHA mortgage insurance. The mortgage insurance guarantees that you will receive expected loan advances. You can finance the mortgage insurance premium (MIP) as part of your loan.

2. Third Party Charges Closing costs from third parties can include an appraisal, title search and insurance, surveys, inspections, recording fees, mortgage taxes, credit checks and other fees.

3. Origination Fee You will pay an origination fee to compensate the lender for processing your HECM loan. A lender can charge the greater of $2,500 or 2% of the first $200,000 of your home's value plus 1% of the amount over $200,000. HECM origination fees are capped at $6,000.

4. Servicing Fee Lenders or their agents provide servicing throughout the life of the HECM. Servicing includes sending you account statements, disbursing loan proceeds and making certain that you keep up with loan requirements such as paying real estate taxes and hazard insurance premium. Lenders may charge a monthly servicing fee of no more than $30 if the loan has an annually adjusting interest rate or has a fixed interest rate. The lender may charge a monthly servicing fee of no more than $35 if the interest rate adjusts monthly. At loan closing, the lender sets aside the servicing fee and deducts the fee from your available funds. Each month the monthly servicing fee is added to your loan balance. Lenders may also choose to include the servicing fee in the mortgage interest rate.

per HUD Mortgagee Letter 2014-10, "This material is not from HUD or FHA and has not been approved by HUD or a government agency."