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Am I Eligible to Get a Reverse Mortgage?
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If you are living on fixed income with home equity as your only asset and need additional funds on a regular basis, you may be the right person to look out for reverse mortgages.
Reverse mortgages require you to satisfy the criteria as given below:
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Borrower's profile:
- Be at least 62 years old. In the case of a couple or co-owners, both must be 62 if their names appear on the title to the home. (If one spouse is under 62, that person's name must be removed from the title so the other person can qualify for the reverse mortgage). The age of the borrower(s) is a critical factor in how large the loan can be
- The borrower(s) must own the home outright or have a low enough balance that the existing mortgage can be paid off through the proceeds of the reverse mortgage.
- You should occupy the property as your primary residence (more than six months/year).
- It is required that the borrower(s) attend a free HUD Counseling Session. Counseling is done either face to face or by telephone, whichever is more convenient for the borrower(s). All individuals on title must apply for the reverse mortgage, attend counseling and sign the loan papers.
Things that do not affect eligibility for a reverse mortgage:
- Income
- Credit history
- Discharged bankruptcy
- Health of the homeowners
Property type:
- Single Family One-Unit dwellings
- 2-4 Unit Owner Occupied dwellings
- Condominiums and Townhomes
- Some Planned Unit Developments (please contact the lender for specifications)
- Some Mobile and Manufactured Homes
Properties like townhomes, condominiums, mobile homes and modular homes often qualify only if they meet the criteria set by the FHA. For mobile homes, one has to own the land in addition to satisfying the criteria set by FHA. In rare instances and locations cooperatives may be eligible.
Should you decide that a reverse mortgage is right for you, the mortgage loan amount will be determined be the age of the youngest borrower, current interest rates, and the appraised value of your home or insurance limits. Typically, high age, low interest rates, and high home value will mean a larger loan.
The best part about a reverse mortgage is that it does not have to be repaid as long as the borrower still occupies the home as their primary residence. When the home is sold, the mortgage lender will receive the principal of the loan as well as any interest accrued. Any remaining funds will go to the borrower or their survivors, but it is important to note that borrowers will never owe more than the value of the home.
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