Do You Qualify For Reverse Mortgage? Here’s What You Need to Know
When you take a loan against the value of your home, it is known as a reverse mortgage. So who can avail of a reverse mortgage? It is a good option for people who are 62 or older, and you borrow against the value of your home and receive a substantial amount as a loan. You get a fixed monthly payment or get a line of credit. It is the type of mortgage that helps you to buy a home and you won’t have to make any payments to the lender.
Instead, the loan is paid off after the borrower passes away, goes away to live somewhere else, or sells his house.
A reverse mortgage also enables you to take stock of the current equity you have built up in your home at the time of retirement. As far as reverse mortgage is concerned there are three types of reverse mortgage you should know about, but the most popular is the HECM or home equity conversion mortgage. The HECM is the reverse mortgage is the lenders who offer on home values below the sum of $970,800. The key thing to know is how you can qualify for the reverse mortgage.
Reverse mortgages cater to the needs of the older homeowners who do not have other sources of retirement savings to keep a tab on the equity they’ve built up for their homes. First, you have to be 62 years old to qualify for a reverse mortgage. You can also add a spouse as a co-borrower who is 62 or older.
To qualify for a reverse mortgage you need to build at least 50% of the equity in your home. Also, you need to live in the house you are taking a reverse mortgage against. It may be either a condominium, house, townhouse, or a manufactured home built on or after the date of June 15, 1976. Also, cooperative housing owners (under FHA rules) cannot avail of reverse mortgages as they are not the owner of the property they are living in but is only part owner of the shares of a corporation.
It holds of New York, where co-operative houses are a common thing and state laws have recently prohibited reverse mortgages in co-ops so that state law until recently has allowed only one-to-four family in condos and residences. The recently reversed bill now allows residents of New York City two types of reverse mortgages in case of borrowers, HECMs that are insured by the federal government.
Income and Credit Score Requirements
Reverse mortgages don’t have any requirements as far as income or credit score is concerned. This is what separates reverse mortgages from a home equity loan or a HELOC or what you call a Home Equity Line of Credit. HELOCs offer suitable access to home equity. For reverse mortgages, you do not have to make payments but the opposite is true of home equity loans and HELOCs you need to have a good credit score to qualify for such loans. Reverse mortgages are also a slightly more expensive option and you may need to pay a heftier fee for the same.
The HUD or the U.S. Department of Housing and Urban Development requires all the people who want to get reverse mortgage borrowers to attempt a HUD-endorsed counseling session. This counseling session may set you back by $125. This session offers you a crash course on a reverse mortgage and teaches you how it can cater to your specific financial circumstances.
Up-Front Mortgage Premium
You need to cough up a fair bit of money to avail reverse mortgage, which includes an origination fee and a mortgage insurance premium. These costs are paid from the loan itself. It means that you do not need to eke out savings to opt for a reverse mortgage. However, these upfront costs are relatively high whether you are paying from your pocket or the equity.
If you don’t qualify for the loans mentioned above then you can try other options such as selling or downsizing. You can do the selling to your own family to keep your home to the family. In some cases, people sell their homes and start living there as a renter to continue living in the place they called home for so many years.
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