Reverse Mortgage Requirements

If you’ve heard about a reverse mortgage and its associated benefits, you may want to find out if you qualify to access the loan.

Thankfully, the requirements are not too difficult to meet, and many American seniors have continued to opt for the mortgage option, instead of letting their money just sit idly in their home equity.

If you are considering a reverse mortgage, it is instructive to know that you won’t pay any tax on the money you receive from your home equity. Plus, you are not required to make monthly mortgage payments.

Eligibility

For one to qualify for reverse mortgage, here are essential criteria one need to meet:
  • You need to be 62 years or older (the youngest borrower listed on the property’s title must be at least 62)
  • You must live in the home as your primary place of abode (applies to eligible spouses even if they are not co-borrowers)
  • Your home must belong to you outright or you have a substantial amount of equity in the home
  • You do not have any outstanding federal debts or tax liens
  • You are up to date on your property tax payments for the last two years
  • The home meets the minimum HUD requirements and standards for property and flood.
  • You attend and complete a mandatory counseling session, and obtain a certificate from a government-approved independent home equity conversion mortgage counselor
If you need help figuring out whether you meet the above requirements, our home equity specialists can walk you through the process and help you determine your eligibility status.

You May Still Qualify, Even if You Have an Existing Mortgage

If you have an existing mortgage (many people do), it does not necessarily mean you can’t be eligible for a reverse mortgage. One of the major reasons many seniors take out a reverse mortgage loan is to pay off any existing mortgages.

Paying off your existing mortgages frees you from the trouble of making monthly mortgage payments. After clearing your mortgage, the remaining proceeds from the loan will be yours to use for whatever purpose you want.

The more equity that is left in your property, the more cash you will be able to receive from a reverse mortgage. That means you will be left with a substantial amount to supplement your retirement income after paying off any existing mortgages.

Other Assessments

Even if you meet the above requirements, a lender or bank will go through your credit history before issuing a reverse mortgage. Checking your credit history enables the lender to substantiate your monthly income against all your monthly financial commitments.

If everything checks out, the appraisal process can commence, to determine the exact loan amount you qualify to receive.

You can receive more funds if you wait until you are older. In fact, the recommendation by the Consumer Financial Protection Bureau is for seniors to hold off taking out a reverse mortgage loan until they are older. This will minimize the risk of burning through their funds too early into retirement and running out of cash to maintain the home and pay property fees.

Further Requirements

In the event that you qualify and have received funds from the equity on your home, you still have a responsibility to stay within the loan terms.

The most important requirements after receiving the loan advance include the following:
  • You must continue to live in the home as your primary residence
  • The home must be well-maintained at all times
  • You must continue to pay property tax, homeowner’s insurance, and other applicable property fees
If you are not sure whether a reverse mortgage is right for you, it is best to speak with a government-approved HECM counselor. You can call 800-569-4287 toll-free to get more information about this powerful financial tool.

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