FHA Home Loans and HUD Reverse Mortgages

FHA has a Home Equity Conversion Mortgage or HECM that essentially is a reverse mortgage which allows you as a homeowner to withdraw a portion of your homes current equity. 

Many seniors take advantage of this safe and secure program.  Older Americans have used this type of mortgage to bolster social security, home remodeling and pay unexpected medical expenses.  The National Council on Aging endorses reverse mortgages as a valid financial option for seniors. 

FHA Reverse Mortgage Description

With a FHA Home Equity Conversion Mortgage you can convert equity that you have built in your home after years of monthly payments to accessible cash.  In times of need this financial tool can be very useful and convenient.  Unlike a second mortgage or traditional home equity loan, immediate repayment is not required until you no longer use the home as your primary residence or you fail to meet established terms of the mortgage. 

Eligibility for FHA’s HECM Reverse Mortgage

You must be a homeowner of at least 62 years of age, own your home in total, or have a low enough mortgage balance that can be paid off from the HECM reverse mortgage and above all else you must live in the home.  Consulting with a HECM loan counselor and little or no cost prior to obtaining the reverse mortgage loan is also required.  The number you can reach a HECM loan counselor is 800-569-4287. 

It doesn’t even matter if your original home loan was FHA insured as your new loan will be.  Your home or primary residence must be a 1 to 4 unit home and occupied by the borrower.  Some HUD approved mobile homes and condominiums that meet FHA requirements also qualify for a reverse mortgage.

FHA Reverse Mortgage versus Traditional Bank Home Equity Loan

Traditional home equity loans require a sufficient income/debt ratio to qualify for the loan.  You are also required to make monthly mortgage payments.  With a FHA HECM reverse mortgage you make no monthly payments and the bank pays you. 

You can also get a reverse mortgage without current high annual incomes.  You also do not make monthly interest payments with a HECM loan.  But, you are still required to pay all applicable real estate taxes and insurance.  You also still have to pay your utilities.  Another benefit is that if you miss a mortgage payment you cannot be foreclosed on by a bank or evicted from your home because you missed a loan payment. 

How Much Can You Borrow? It depends on the following:

Your age

Current market interest rate

Appraised value of your home

Sale price of your home

FHA mortgage limits

FHA HECM Loans Come Due When?

If you do not pay your property taxes or hazard insurance

If you move to a new residence

If you do not live in a home for 12 months in a row

If you permit the home to deteriorate without making appropriate repairs

How do you Receive FHA HECM Payments?

Tenure – equal monthly payments

Term – equal monthly payments for a fixed period

Line of Credit – payments until your line of credit is exhausted

Modified Tenure – both line of credit and monthly payments

Modified Term – both line of credit and monthly payment for a fixed time period

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The official U.S. Government FHA Web site is HUD.gov