Qualifying for a Reverse Mortgage
Individual reverse mortgage products may have particular requirements. Here are a few basics that apply to the U.S. Department of Housing and Urban Development's (HUD) Home Equity Conversion Mortgage (HECM):
- You and any co-borrower must be at least 62 years of age.
- If you are applying for a Home Keeper® Mortgage, you must occupy the home as your primary residence (where you live a majority of the year).
- You must own your home free and clear or have a low mortgage balance.
- You must attend pre-application reverse mortgage counseling before applying.
There are also other considerations that are generally applicable:
- Lenders base the loan amount on three factors: the age of the borrower(s), the number of borrowers, and the adjusted property value for Home Keeper mortgages or the maximum claim amount for the HECM.
- The HECM contains a "growth" feature that lets any money in the line of credit grow on a monthly basis. If you do not anticipate needing a lump sum draw at closing, you should take this growth feature into consideration. While a HECM may offer less money in the line of credit than any other products, it could grow to exceed the money available in other reverse mortgages.
- You can change payment options at any time over the life of the loan for a small fee.
- No part of the loan is due until you no longer live in your home or if you violate the loan's terms and conditions, at which time the full loan is due. You can prepay -- or partially repay -- the loan without a penalty.
- You or your estate will never owe more than the value of the property.
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