FHA reverse mortgages Guidelines

Reverse Mortgage Guidelines

Although there are no cold hard figures to support it, the common belief regarding is that many of America’s retired seniors are NOT financially liquid but they DO have great equity. By definition, it does not mean that they are financially needy. It only means that the mortgage on their homes has been totally paid, but they do not have money to pay the bills.

Luckily for seniors who are at least 62 years old, they can convert the equity of their homes into cash through a reverse mortgage loan. Since it is a fairly new product, many seniors know little about it. Here are some FAQs. You can definitely glean guidelines from the answers.

What is a reverse mortgage? Please define this term.

This is a reverse mortgage defined: it is new type of mortgage that you can apply against your home. By definition, it is a non-recourse loan, which means the cash value of your home is the only financial instrument that can be used to repay the loan.

• What is a major difference between a reverse mortgage and other types of mortgages? Your FAQ sheet should discuss it.

If you go ahead with an ordinary mortgage, you need to repay it in monthly installments. With a reverse mortgage, the reverse of payment is true. You don’t need to pay anything so long as you are still breathing and are living inside your home. The reverse mortgage loan is only repaid when the house is sold or refinanced. This is normally when you are already dead or are ready to permanently move out of your house.

• What is one of the major guidelines of reverse mortgage loans?

There are actually three types of defined reverse mortgages. However, most seniors only apply with Home Equity Conversion Mortgages (HECM). The HECM is run by the U.S. Department of Housing and Urban Development through the Federal Housing Administration (FHA). HECM reverse mortgages are among the least expensive in their class. If you want to apply for a HECM loan, the federal government’s defined guidelines require that you first get counseling from an accredited reverse mortgage counselor. (You will still get the same answers as our FAQ sheet) Reverse mortgages in your personal financial definition are not always the best solution. Your counselor should walk you through the nitty-gritty pros and cons of reverse mortgages – at the end; he should have completely defined it for you. He will also explore your particular situation to know if a reverse mortgage is truly the best solution for you.

• How much cash can I get on my equity?

There is a formula for calculating the amount, however we will not list the full math here (you will find the same thing in all FAQs). It takes into account the borrower’s age, the home’s fair market value, current interest rates, and the maximum FHA-set loan amount allowable in the borrower’s county.

In general, the older you are at the time of application, the higher the equity-to-cash ratio. If you are 76 years old, you can get $149, 000 on $250, 000 equity. On the other hand, if you are 62 years young, you only get $110, 000.

• What is the definition of a non-recourse loan? Will my heirs inherit my reverse mortgage debt?

Guidelines on reverse mortgage indicate that it is a non-recourse loan and therefore is non-assignable. In...


FHA backing away from Reverse Mortgages....

2009-09-22 15:05:48 by Apprsr

FHA Looking to Decrease Its Exposure to Reverse Mortgages
Reverse mortgage lenders are learning that the Federal Housing Administration is moving quickly to implement a reduction in the loan proceeds that seniors can receive from a FHA-insured Home Equity Conversion Mortgage.
Mortgagedailynews.com

Declining home values squeeze reverse mortgages

2009-10-04 22:05:18 by Apprsr

Kenneth Harney
Sunday, October 4, 2009
(10-04) 04:00 PDT Washington - --
Declining home values have put a serious squeeze on one of the mortgage market's most popular and fastest-growing financing concepts: the Federal Housing Administration's reverse mortgage program for seniors 62 and older.
In a letter to reverse mortgage lenders Sept. 23, FHA Commissioner David Stevens said his agency must reduce the maximum amounts seniors can receive on reverse mortgages because of a $798 million estimated deficit in the program in the coming fiscal year

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  • Avatar janelle p Can someone get a reverse mortgage if they own more than one property?
    Jun 26, 2011 by janelle p | Posted in Renting & Real Estate

    Can someone get a reverse mortgage on the property they live in but still collect rent from others they have? I don t want to call one of these places because they are all 800 numbers, and I don t want to be bothered by them until I m more clear how these things work.

    • Reverse mortgages are not for people with assets. If you own rental property, why would you want a reverse mortgage?