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
June 11, 2018 - For those who want to cash in on the value built up in the home over time, the FHA cash-out refinance is an important option to consider. Be prepared for a new credit check and request copies of your credit reports. Then examine your FICO scores and your credit history carefully.
May 27, 2018 - When it’s time to refinance, the type of FHA loan you apply for will depend on the outcome of the loan-do you want cash out? A lower mortgage payment? Do you need to do rehab or repairs? Each refinance is different and there isn’t a one-size-fits-all solution.
May 15, 2018 - How does your participating FHA lender decide to approve or deny your FHA mortgage loan? It doesn’t matter if you are applying for a construction loan, refinancing, or buying an existing home. Lenders must follow certain steps to determine your creditworthiness.
May 6, 2018 - Conventional mortgages require private mortgage insurance (PMI) unless the borrower makes a lender-prescribed down payment that eliminates the need. FHA mortgage loans are different. They don’t require PMI, but they do require an Up Front Mortgage Insurance Premium and a mortgage insurance premium (MIP) instead.
April 11, 2018 - The timing of your FHA loan application and when you submit it are among the most popular FHA loan eligibility tips. What do you need to know about successfully applying for an FHA home loan? Here are some of the basics.
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!
