FHA Reverse Mortgage
Convert Your Equity into Income
Established in 1934, The Federal Housing Administration (FHA) offers mortgage insurance on loans through FHA-approved lenders. The FHA provides this coverage for single and multi-family homes, and other approved purchases. The FHA does not issue loans, but FHA mortgage insurance is quite attractive for a prospective lender.
The main reason for this is simple; FHA mortgage insurance protects the lender's investment should a homeowner default on the mortgage. Loans insured by the FHA feature low down payments, and costs for FHA mortgage insurance are built into the mortgage payment. Those costs disappear five years into the loan or when the loan reaches 78% of the property value (whichever is longer).
An FHA reverse mortgage is designed for homeowners age 62 and older. It allows the borrower to convert equity in the home into income or a line of credit. The FHA reverse mortgage loan is also known as a Home Equity Conversion Mortgage (HECM), and is paid back when the homeowner no longer occupies the property.
There are requirements for an FHA-insured reverse mortgage or HECM;
- The loan is based on the age of the youngest borrower if there are co-signers.
- Homeowners are required to get consumer counseling and education before a HECM loan is approved.
- Borrowers must own and live on the property as the primary residence.
Unlike other FHA loans, there are no income or credit qualifications for this type of loan. You will be required to have a current appraisal on the property as the amount of an FHA reverse mortgage is based on the home's value or the FHA insurance limit, whichever is lower. The FHA reverse mortgage;
- Is a loan based on current interest rates.
- Allows closing costs to be financed in the reverse mortgage.
- Is for single-family homes or up to a four-unit home, but must be occupied by the borrower.
- Is also permitted for FHA-approved condominiums and manufactured homes.
FHA reverse mortgages or HECM loans require the home to conform to FHA property standards and flood requirements. The FHA reverse mortgage has a variety ways the borrower can receive the money including monthly payments, a line of credit, or combinations of payments and credit. The borrower does not pay on these loans until the house is sold. The loan is repaid from the proceeds of the property sale including interest. Any remaining equity in the home after the loan has been repaid belongs to the homeowner.
If there is not enough money from the sale of the home to repay the loan in full, FHA insurance is used to pay the difference. If you need further clarification of the details of an FHA reverse mortgage, ask your loan officer to explain before you sign.
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FHA Loan Articles and Mortgage News
November 11, 2018 - There are several circumstances that can kill the progress of your FHA home loan. Do you know how to anticipate these issues? Some are borrower-preventable, some are circumstantial, and others may be completely beyond the borrower, lender, or seller’s control.
November 9, 2018 - While using your existing lender may be easier, you may not always get the most competitive rates or terms without shopping around. Any participating FHA lender offering the refinance loan you seek can help you; don’t feel limited to the financial institution that originated your first loan.
November 2, 2018 - There are some facts and figures from recent home loan research that indicate that refinance loans are about to become more popular than ever and there are some stats you should know that may eliminate any doubts you have going forward.
November 1, 2018 - These mortgages are strictly for FHA-to-FHA refinances. They have no FHA-required credit checks and must result in a specific tangible benefit to the borrower, such as a lower payment, lower interest rate, or moving out of an adjustable rate loan to a fixed rate FHA mortgage.
October 30, 2018 - FHA reverse mortgages (Home Equity Conversion Mortgages) with case numbers assigned between October 1, 2018 and September 20, 2019 will require a second appraisal in cases where the FHA determines there has been an inflated property valuation.
FHA.com Reviews
FHA.com is a one-stop resource for homebuyers who want to make the best decisions when it comes to their mortgage. With our detailed, mobile-friendly site, individuals can access information about different FHA products, the latest loan limits, and numerous other resources to make their homebuying experience easier. Take a look at some of the reviews from other FHA.com visitors!
