There are several types of reverse mortgages. The more popular ones are:
(1) Single Purpose - are offered by some state and local government agencies and nonprofit organizations
(2) Home Equity Conversion Mortgages (HECM) – an FHA loan, the most popular of the reverse mortgages and is backed by the U.S. Department of Housing and Urban Development (HUD). The maximum loan size is determined by the area of the country in which you live.
(3) Fannie Mae Home Keeper – for larger loan sizes (currently up to $417,000)
(4) Proprietary Reverse Mortgages which are private loans that are backed by the companies that develop them.
Who Qualifies?
• Married or Single – the age of the youngest person is used to qualify for the mortgage. If you are 70 and your spouse is 60, you would not be able to apply until the spouse reaches 62.
• Age requirements – between the ages of 62 and 100 years old
• Property type – it must be your primary residence. It can be a home, multi unit property up to 4 units with you living in one unit, condo, Townhouse, or Manufactured home, as long as it is an FHA qualified property.
• Equity – which is what is the difference between the property value and what you owe on the mortgage. You must have equity available in the property.
• Credit is not a requirement. You can be in foreclosure or bankruptcy and obtain a Reverse Mortgage. You must have enough equity available to pay off the foreclosure or bankruptcy to qualify for the Reverse Mortgage.
• The home must be in properly maintained. If repairs are needed, required repair costs cannot exceed 15% of the maximum claim amount. Repairs can be done after the closing, using proceeds from the reverse mortgage to pay for them.
Loan Features
• The reverse mortgage loan advances are not taxable.
• Does not affect Social Security or Medicare benefits, though SSI does have stipulations of use of money you receive. (Please ask your Mortgage Broker for more information.)
• You retain title to your home and do not have to make monthly repayment.
• You are still responsible to pay all Property Taxes, Insurances, Homeowners Association fees, repairs and maintenance on the property. These payments that may have been paid by the lender will now be your responsibility to pay when due.
• The loan must be repaid when the last surviving borrower sells the home, or no longer lives in the home as principal residence.
• In the HECM program, a borrower can live in a nursing home or other medical facility for up to 12 months before the loan becomes due and payable.