FHA HECM loans are like other home equity loans--they let you cash in on part of the value a home has built up over the years. But the FHA reverse mortgage is unique because FHA borrowers don't make any payments

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FHA Loan Articles

News, updates, and explanations to keep you informed.

What is an FHA Reverse Mortgage?

There are many programs and home loan products that allow homeowners to take advantage of the equity they've built up in their homes. One resource qualified FHA mortgage holders have at their disposal is the Home Equity Conversion Mortgage (HECM) loan, also known as an FHA reverse mortgage. FHA HECM loans are like other home equity loans--they let you cash in on part of the value a home has built up over the years. But the FHA reverse mortgage is unique because FHA borrowers don't make any payments on FHA HECM loans until they stop using the home as their principal residence. There are no mortgage payments due until you stop using the home as a primary residence.

Since a "principal residence" is defined as the place where the borrower does the majority of their dwelling, using summer homes, time shares or RVs doesn't disqualify you from an FHA HECM loan. As long as you meet the requirements for an FHA HECM loan and use the property as your main address, you can take the cash value of your home's equity to use in any number of ways.

QUALIFYING FOR FHA REVERSE MORTGAGE OR HECM LOANS

To qualify for an FHA reverse mortgage, you must be at least 62 years old. You must own your home, or have a low enough balance that the FHA reverse mortgage loan will pay off the outstanding amount when the HECM loan is approved. Like other FHA loans and FHA mortgages, the property must be either a single-family residence or a one to four unit property where the borrower occupies one of the units.
Condos and manufactured homes qualify, but only if they meet FHA requirements.

FHA reverse mortgages are also different than conventional reverse mortgages or HECM loans because the borrower is required to get financial counseling from an approved HECM counselor. This is a condition of the loan and is non-negotiable. The Department of Housing and Urban Development recommends searching for an approved counselor by calling the Housing Counseling Clearinghouse at 1-800-569-4287.

NON-FHA HOMES

It doesn't matter if you purchased your home with a conventional loan or an FHA mortgage. As long as you meet FHA and HUD requirements for approval, you can use an FHA reverse mortgage to claim the cash value equivalent for the equity in your home.

One of the conditions of the FHA reverse mortgage is that you aren't allowed to owe more than the home is worth. The amount of your loan is determined by interest rates, your credit report, and by the appraised value of the property. If you are approved for an FHA reverse mortgage or HECM, you must pay off any remaining balance at closing time on your new loan. As with any other FHA home loan, you are still responsible for paying property taxes, insurance, and related bills.

Like other FHA mortgage products, your application must be made through an FHA approved lender. If your current financial institution does not participate in FHA loan programs, look up the local FHA-approved banks in your area to get started.