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The FHA reverse mortgage program, also known as the Home Equity Conversion Mortgage program (HECM), is designed for qualified borrowers aged 62 and older who either own their home or are very close to doing so.

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FHA Reverse Mortgage Questions and Answers

February 23, 2016 - The FHA reverse mortgage program, also known as the Home Equity Conversion Mortgage program (HECM), is designed for qualified borrowers aged 62 and older who either own their home or are very close to doing so. With the publication of HUD 4000.1, the new FHA Single Family Home Loan rulebook, we discover some changes, alterations, and restatement of FHA HECM loan policy. Here are some common questions and answers about the FHA HECM program:

Does FHA Have Property Requirements for Reverse Mortgages?

In order for properties to be eligible for an FHA reverse mortgage, they must meet all FHA property standards and flood requirements regardless of the kind of home being considered. The eligible property types are:
  • 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
Is My Manufactured Homes Eligible for an FHA HECM Loan/Reverse Mortgage?

Yes, FHA loan rules do (technically) permit HECM loans for mobile homes. However the participating lender may or may not offer HECM loans for manufactured housing. You will need to find a lender willing to offer a reverse mortgage on the property you own. It may be necessary to shop around for a participating lender to find the most advantageous terms.

Is There an HECM Loan Amount Maximum?

The FHA/HUD official site, FHA.gov, states that the answer to this question depends on the following details:
  • Age of the youngest borrower or eligible non-borrowing spouse
  • Current interest rate; and
  • Lesser of appraised value or the HECM FHA mortgage limit of $625,500, or the sales price
How are HECM/Reverse Mortgage Funds Paid Out?

This is one important aspect of the FHA reverse mortgage program that has changed in the last year or so--HECM loan funds disbursement depends greatly on the type of HECM loan you apply for. There is a fixed interest rate option and an adjustable interest rate option.
For fixed interest HECM or reverse mortgages, FHA loan rules permit the Single Disbursement Lump Sum payment plan for fixed interest rate FHA HECMs. For adjustable rate HECMs, FHA loan rules permit the following:
  • 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.