An FHA reverse mortgage is designed for borrowers age 62 and older. It is also known as a Home Equity Conversion Mortgage.

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FHA Reverse Mortgage

Convert Your Equity into Income

FHA Reverse Mortgage - HECM

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.

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.

FHA Refinance Options for Homeowners

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FHA Loan Articles and Mortgage News

FHA Refinance Loans: Why a New Appraisal Is Required

March 15, 2023 - When it’s time to refinance a home loan, there are two basic types of refinancing. One type is an appraisal-required refi loan, the other is a no-appraisal refinance. For FHA loans, the type of refinancing you get without an appraisal is the FHA Streamline Refinance Loan.

FHA Cash-Out Refinance Loans and Your Taxes

March 8, 2023 - Some borrowers want to know whether the money they take in cash when an FHA Cash-Out Refinance loan closes is taxable on federal income taxes and whether there are allowable deductions associated with cash-out refinances.

Should I Make an FHA Mortgage Payment Twice Each Month?

March 6, 2023 - How many times a month should you pay your mortgage? That sounds like a silly question to some. After all, mortgage payments are due once per month, and you should pay on time. Why pay twice a month?

FHA Streamline Refinance Loans in 2023

February 18, 2023 - There are many different types of refinance loans available. One government-backed home loan option is called the Streamline Refinance. It’s open to FHA borrowers and those who qualify for the VA home loan program.

FHA 203(k) Rehabilitation Loan Planning

February 17, 2023 - If you are interested in buying a fixer-upper home or refinancing your current home with an FHA 203(k) Rehabilitation Mortgage, there are important steps to take in the planning stages to help you get off to the right start.