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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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May 23, 2019
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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

FHA Loan Tips for Signers and Co-Signers

May 13, 2019 - FHA home loans and refinance loans are designed for either a single borrower or multiple borrowers; procedures for approving loans for multiple borrowers are more or less the same as for a single applicant. The lender must determine that all parties on the loan are creditworthy.

FHA Cash-Out Refinance Loan Tips

May 11, 2019 - FHA cash-out refinance loans do require an appraisal, and borrowers who live in housing markets that are on the rise should check to see how far property values have increased since the last appraisal.

What to Do Before Refinancing

May 8, 2019 - Remember, it’s better to take longer to prepare for your refinance if you need to in order to fix things like payment history (a recommended 12 months of on-time payments for all bills) or correct identity theft issues on a credit report.

Converting Your Home Equity Into Cash

May 3, 2019 - The FHA Cash-Out Refinance loan is a tool a homeowner can use to refinance the home and take cash back on the transaction. What does the FHA home loan rulebook, HUD 4000.1, have to say about these loans compared to other FHA refinance options?

Refinancing the FHA Adjustable Rate Mortgage Before Reset

May 1, 2019 - ARM introductory rates will expire at some point depending on the terms of your mortgage loan agreement. Borrowers who want to avoid an interest rate adjustment have the option to refinance the mortgage and escape the ARM loan reset.

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!