FHA HECM Reverse Mortgages
Click here for
the top 10 things to know if you are interested in a
HECM
reverse mortgage.
The HECM FHA insured reverse
mortgage can be used by senior homeowners age 62 and
older to convert the equity in their home into
monthly streams of income and/or a line of credit to
be repaid when they no longer occupy the home. The
loan, commonly known as HECM, is funded by a lending
institution such as a mortgage lender, bank, credit
union or savings and loan association. To assist the
homeowner in making an informed decision of whether
this program meets their needs, they are required to
receive consumer education and counseling by a
HUD-approved HECM counselor.
HECM counselors will discuss program eligibility
requirements, financial implications and
alternatives to obtaining a HECM and provisions for
the mortgage becoming due and payable. Upon the
completion of HECM counseling, the homeowner should
be able to make an independent, informed decision of
whether this product will meet their needs. You can
also use this handy
Reverse Mortgage Calculator to help you see if
you qualify.
Homeowners who meet the eligibility criteria can
complete a reverse mortgage application by
contacting us at 602-993-0000.
Borrower Requirements:
-
Age 62 years of age or
older
-
Own your property
-
Occupy your property as
primary residence
-
Participation in a
consumer information session given by an
approved HECM counselor
Mortgage Amount Based On:
Financial Requirements:
-
No income or credit
qualifications are required of the borrower
-
No repayment as long as
the property is the primary residence
-
Closing costs may be
financed in the mortgage
Property Requirements:
-
Single family home or
1-4 unit home with one unit occupied by the
borrower
-
HUD-approved
condominiums
-
Manufactured homes and
leased land
-
Meet FHA property
standards and flood requirements
How the Home Equity
Conversion Mortgage Program Works:
Homeowners 62 and older who
have paid off their mortgages or have only small
mortgage balances remaining, and are currently
living in the home are eligible to participate in
HUD's reverse mortgage program. The program allows
homeowners to borrow against the equity in their
homes. Homeowners can select from five payment
plans:
-
Tenure - equal monthly
payments as long as at least one borrower lives
and continues to occupy the property as a
principal residence.
-
Term - equal monthly
payments for a fixed period of months selected.
-
Line of Credit -
unscheduled payments or in installments, at
times and in amount of borrower's choosing until
the line of credit is exhausted.
-
Modified Tenure -
combination of line of credit with monthly
payments for as long as the borrower remains in
the home.
-
Modified Term -
combination of line of credit with monthly
payments for a fixed period of months selected
by the borrower.
Homeowners whose
circumstances change can restructure their payment
options for a nominal fee of $20.
Unlike ordinary home equity loans, a HUD reverse
mortgage does not require repayment as long as the
home is the borrower's principal residence. Lenders
recover their principal, plus interest, when the
home is sold. The remaining value of the home goes
to the homeowner or to his or her survivors.
You can never owe more than your home's value.
If the sales proceeds are
insufficient to pay the amount owed, HUD will pay
the lender the amount of the shortfall. HUD's
Federal Housing Administration (FHA) collects an
insurance premium from all borrowers to provide this
coverage.
The amount a homeowner can
borrow depends on their age, the current interest
rate, other loan fees and the appraised value of
their home or FHA 's mortgage limits for their area,
whichever is less. Generally, the more valuable your
home is, the older you are, the lower the interest,
the more you can borrow.
For example, based on a loan
with an interest rates of approximately 9 percent,
and a home qualifying for $100,000, a 65-year-old
could borrow up to 22 percent of the home's value; a
75-year-old could borrow up to 41 percent of the
home's value; and, an 85-year-old could borrow up to
58 percent of the home's value. The percentages do
not include closing costs because these charges can
vary.
There are no asset or income
limitations on borrowers receiving HUD's reverse
mortgages.
There are also no limits on
the value of homes qualifying for a HUD reverse
mortgage. The value of the home will be determined
by an appraisal. However, the amount that may be
borrowed is derived from the lower of the appraisal
amount or FHA mortgage limit for the area. The
FHA limits usually increase each year. As a result,
owners of higher-priced homes can't borrow any more
than owners of homes valued at the FHA limit.
HUD's reverse mortgage
program collects funds from insurance premiums
charged to the homeowners. Homeowners are charged an
upfront insurance premium which is 2 percent of the
maximum claim amount that may be borrowed plus a .5
percent annual premium.
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