Many older Americans are taking advantage of a new type of FHA loan. This new loan actually pays the borrower over time, as opposed to more traditional type of loans. This new loan is called a Reverse Mortgage. In the simplest of terms a reverse mortgage converts the equity of a borrowers home into cash payments. So how do you know if you qualify? Listed below are the 4 things potential borrowers have to have in order to be eligible for a reverse mortgage.
1. Potential borrowers must be at least 62 years old. The age of the borrower is a critical factor in how large the loan can be, but that will be explained more after the requirements.
2. Borrowers must actually own the home and use it as their primary residence. Certain types of homes are ineligible; they include some manufactured homes, cooperatives and most mobile homes.
3. The Department of Housing and Urban Development (HUD) has some basic property standards that have to be met in order to qualify for a reverse mortgage.
4. The final requirement is that you take the time to discuss a reverse mortgage with a HUD approved counselor. This counselor will provide more information and help you decide whether a reverse mortgage is right for you. The will also help you find a lender and can determine whether your home meets HUD minimum standards.
Should you decide that a reverse mortgage is right for you, the mortgage loan amount will be determined be the age of the youngest borrower, current interest rates, and the appraised value of your home or insurance limits. Typically, high age, low interest rates, and high home value will mean a larger loan.
The best part about a reverse mortgage is that it does not have to be repaid as long as the borrower still occupies the home as their primary residence. When the home is sold, the mortgage lender will receive the principal of the loan as well as any interest accrued. Any remaining funds will go to the borrower or their survivors, but it is important to note that borrowers will never owe more than the value of the home